- The USD was weaker against all but the Japanese yen, as traders booked profits ahead of today’s presidential debate. European and US indices also pared gains, although volatility was mostly contained.
- Gold, silver and volatility indices were higher overnight in anticipation of today’s big event, whilst oil prices fell sharply as traders began to doubt that OPEC will increase oil supply in January.
- GBP was weaker after Britain’s House of Commons paved the way for the UK to break the divorce deal with the European Union. This is despite legal threats from Europe and whilst Brexit talks continue in the background this week.
Trump vs Biden:
This key event kicks off at 11am Sydney time, and markets eagerly await the outcome as there is an expectation it could be more volatile than previous debates, given the toxic atmosphere in politics and of course between Trump and Biden.
The debate will be moderated by Fox News host Chris Wallace, who has chosen the topic to be discussed over the six, 15-minute segments.
The six topics for the debate include:
- The Trump and Biden records
- US Supreme Court
- The US economy
- Integrity of the election
- Racial protests and violence
Expect the gloves to come off and markets will react to who they think is winning the debate as it progresses. Of the six topics, we suspect the economy, Covid-19 and election integrity may provide the more volatile reactions.
- As Biden is expected to raise taxes, it could weigh on sentiment (weaker stocks) if he is perceived to be winning the debate overall. A trump win is likely to be supportive of stocks, given his low tax-corporate friendly policies.
- The USD may strengthen if Trump is ahead, as his “America first” policies increase the likelihood of hostile trade relations via tariffs on European and Chinese imports, making the dollar a safe-haven target.
- Asian markets could be under pressure with a Trump win due to his anti-globalisation /anti-trade stance.
China PMI is also at 11am Sydney but, given markets are waiting for the debate, it may have a subdued reaction unless the number deviates wildly away from expectations.
Hang Seng (HK50): Potential for a Dead Cat Bounce?
- Bias remains bearish below 24,156, although we’d step aside if strong bullish momentum returns from current levels.
- We’ve seen a minor pullback from last week’s lows and yesterday’s inverted hammer suggests the minor correction may be nearing its completion.
- Bears could seek to fade into moves below the Fibonacci levels to target recent lows and (if momentum persists) the 22,500 area.
- Keep an eye on sentiment across Asian today as the presidential debate is today’s key driver.
Gold (XAU/USD): Counter-trend Rally Stalls at Resistance
- After breaking lower from it’s triangle, gold’s rebound has paused just beneath a resistance zone (50%, and 1900-1910 zone).
- We will revert to a bearish bias if momentum clearly rejects the 1900-1910 resistance zone.
- We will take a bullish bias with a clear break above 1910, with 1932 becoming the first target.
- A neutral stance remains around current levels.
WTI: Bearish Engulfing Candle Below the 50-day eMA
- Yesterday’s bearish engulfing candle takes WTI firmly below the 50 and 200-day eMA’s.
- Another lower high has formed along the bearish trendline.
- Bears could consider fading into rallies within yesterday’s candle range.
- The bias remains bearish below the 40.88 high but the bearish trendline can also be used to aid with risk management.
EUR/JPY: It was an explosive move higher from the bullish engulfing candle highlighted yesterday and stalled around the 10 handle. Whilst we remain bullish we’d prefer to see some consolidation before reconsidering longs.
Silver (XAG/USD): The potential countertrend rally highlighted yesterday moved to a 4-day high. The H4 timeframe remains bullish, but we’d suggest also tracking gold to see how it behaves around the presidential debate.
EUR/USD: Removed from watchlist with a break above 11700. We can reassess after the debate.
EUR/AUD: Prices continue to coil up beneath 1.6600 resistance. We will add back to the watchlist when the market tips its hand.
AUD/USD: Mean reversion is underway above key support. Initial target around 0.7130 reached. We’ll step aside until after the debate.
USD/CHF: Prices need to correct lower before we reconsider long opportunities.