- As expected, it was an eventful day through the US election, with volatility kicking off in Asia and continuing through the European an US sessions. In many ways it felt like a repeat of 2016, with Trump gaining far more support than polls had predicted and betting shops flipping to forecast a Trump win at one stage before reverting back to Biden.
- Whilst Biden remains ahead for the most post part, there are many votes left to count due to the expected mail delays. Despite this, Trump declared victory and vowed to take the decision to the Supreme court to stop votes being counted, whilst Biden spoke to reassure his voters that they were on track to win. Trump’s campaign team have filed a lawsuit against Michigan and Pennsylvania to halt votes being counted in these pivotal state (despite Biden holding a slight lead).
- Despite the turbulent ride, equities closed broadly higher with most major indices exceeding their ATR’s (average true ranges).
- The USD index (DXY) trades slightly higher from its open yet far beneath yesterday’s low, meaning it has gained little ground despite a volatile session. Overall, the dollar was weaker against its major piers, with AUD/USD leading the session with a 1.5% gain and tracking indices closely.
- Interestingly, price action on gold and silver remained relatively subdued and both daily ranges were below their ATR’s. Regardless, most markets endured a volatile and choppy session throughout the past 24 hours.
Today’s Calendar Events (Time are GMT+10 Sydney)
BOE Bank Rate: * Update * News recently broke from the Sun (UK tabloid newspaper) that BOE are tipped to ramp up their QE (quantitative easing) programme later today. GBP has fallen sharply yet London traders are yet to react.
FOMS Meeting: It’s difficult to imagine what impact this meeting could have on the markets, given it was scheduled around the US presidential election. Still, it no doubt warrants a look.
US Election: Every step towards a final result is far more likely to count to markets than economic data. As things stand, both Trump and Biden still have paths to the Whitehouse, and it is a close call.
Whilst Biden continues to lead and remains the favourite to win, his success hangs on whether delayed postal votes favour the Democrats, and that Trump doesn’t succeed in suppressing votes via the courts.
Scenarios to consider:
- A Trump win with a Republican Senate is likely the most bullish for indices. This makes a coronavirus relief package easy to implement quickly, and interest rates and taxes are likely to remain low (which is good for the consumer and corporate America).
- A Biden win with a Republican Senate could also be bullish for equities, but less so than a scenario one. It provides a resolution over the near-term (investors hate uncertainty) and Biden will struggle to raise taxes etc. However, it could make it more difficult to implement a coronavirus relief package.
- A Biden win with a Democratic Senate could also be bullish initially as it makes it far easier for a coronavirus relief package to arrive. Yet corporate America would be concerned about higher taxes which could eventually weigh on markets.
- If this drags on and goes to the supreme court (with delays of up to 6 weeks) then we could be in for a volatile yet less directional ride.
S&P 500 (US500): Trend Points Higher on Hopes of Quick Resolution
- Looking past the turbulence of yesterday, the trend points higher as it appears Biden remains in the lead. 3440 support and 3478-88 resistance are pivotal levels of the near-term.
- A break above resistance (and the monthly pivot) assumes bullish continuation and brings the upper resistance levels into focus as targets.
- A break below 3440 assumes a deeper correction. Although if this drags on and goes to court we could be in for another bout of turbulence to the downside.
Bitcoin (BTCUSD): Breaks Above June 2019 High
- Bitcoin has broken above the June 2019 high in line with the dominant, bullish trend.
- Bulls could look for support to build around 13,800 or the rising trendline and keep an open upside target.
- A clear return of bearish momentum removes the bullish bias. A break beneath the rising trendline provides a near-term bearish bias.
Ethereum (ETHUSD): Breakouts of Bearish Channel
- Whilst Ethereum continues to lag behind mighty Bitcoin, its price action appears cleaner.
- The four-hour chart has seen a bullish spike out of a bearish channel and the daily chart (not pictured) has produced a morning star reversal pattern.
- Bulls could initially target the 425 highs around the monthly pivot and use the monthly pivot or the broken bearish trendline to aid with risk management.