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Intermarket:
- SP Futures 3318 (+0.55%)
- EUSTXX 3040 (+0.89%)
- Crude Oil 36.80 (-0.03%)
- US 10YR 0.85 (-0.45%)
- EurUsd 1.658 (+0.15%)
- UsdJpy 104.71 (+0.04%)
- DAX 11884 (+1.01%)
As we enter Election Day, Joe Biden has a 61% probability of winning. According to US Elections Project, early voting has shattered records with near 100 Million votes cast. As noted in our Election Preview, the markets are potentially mispricing the odds of a contested election. Our view is that the race is much closer than the polls would suggest.
In any case, many investment managers have trimmed positions in order to weather the volatility that will no doubt materialise. It is wise for all traders to do the same.
Elsewhere, tensions between China and Australia continue to escalate. AFR wrote Chinese media speculated this week that Australian copper could be hit with restrictions. SCMP later posted a story that wheat exports from Australia are expected to join a list that already contains barley, sugar, red wine, timber, coal, lobster, copper ore and copper concentrates. Markets didn’t react however, as focus is on the US Elections.
In the UK, PM Johnson is facing opposition as Tory MPs threaten to vote against “authoritarian and coercive” lockdowns and retailers warn of a “nightmare before Christmas”.
Matters that Matter:
• Australia c.bank trims rates as expected, expands bond buying, ready to do more if needed
• In final pre-election push, Biden and Trump gird for possible court battle
• Biden leads Trump narrowly in Florida on eve of election -Reuters/Ipsos
• Europe’s COVID-19 curbs prompt pushback amid bleak countdown to Christmas
• Hong Kong wants cryptocurrency trading platforms to be regulated – SFC
• Canadian Government: New mandatory requirements for travellers to Canada as of Nov 21; travellers to submit information electronically via ArriveCAN before boarding flight; travellers who maybe subjected to action from verbal warning to CAD1,000 fine
• Terrorist attack in Vienna, but markets unfased.
• Tory MPs threaten to vote against PM Johnson’s “authoritarian and coercive” lockdown and retailers warning of a “nightmare before Christmas”.
Majors 1-Day View:
USDJPY
- Monday posted the 2nd higher daily high & low in a row, but with a little change close, signals remain rather neutral. Moreover, with influential event risk looming, remaining neutral between 104.00 and 105.00 seems a better play.
- Japan holiday slows markets, liquidity thin.
- Offers reported around 105.00, bids 104.60s.
EURUSD
• Prices posted the 5th lower daily high & low in a row, confirming the downwards bias. However, buyers returned in Asia today and while the move is corrective, it may extend. As such, the call is to sell any rally towards 1.1700 with the reminder that decisive event risk is just around the corner.
• Bias still down on ECB easing bias and lockdowns spreading across Europe.
AUDUSD
• Prices posted a recovery of over ½ big fig Monday, reversing Friday’s losses. Despite sellers returning in Asia trade, the outlook for today is neutral between .7000 and .7070 ahead of key event risk.
• RBA eases as expected.
• Focus now on US Elections.
GBPUSD
• Initial losses of almost 1 Big Fig were recovered into the close on Monday, leaving signals more mixed. With the trend of lower daily highs still intact, the bias remains bearish and the call is to sell any rally towards 1.2980/90 keeping in mind that liquidity will be poor ahead of key event risk.
• Brexit still in limbo, focus on COVID-19 mass testing in Liverpool as Johnson faces opposition on lockdowns.
• US Elections main risk.
FX Relative ATR Grid
Comment: Ranges remained surprisingly healthy on JPY pairs and CAD pairs yesterday. Uninspiring action was seen elsewhere ahead of tonight’s US Election. Remember that from a weekly perspective, NZD is due for a range expansion.
FX Relative Strength Grid
Comment: the main signals going into Tuesday are CHF weakness, USD weakness vs CAD strength. With that said, liquidity will be poor as traders await the outcome of the US Elections.