02-Nov-2020

1) EUR/USD: 1.1615-10 Area Holds The Key Amid COVID-19 Worries, Ahead Of US Election
2) GBP/USD: Break Below 1.2880-70 To Pave The Way For Further Weakness
3) XAU/USD: Gold Looks South As US Election Jitters Buoy The Dollar

1) EUR/USD: 1.1615-10 Area Holds The Key Amid COVID-19 Worries, Ahead Of US Election

The EUR/USD pair witnessed some follow-through selling on Friday and settled near the lower end of its monthly trading range, just below the mid-1.1600s. The pair did attempt a minor recovery through the early part of the trading action, albeit struggled to capitalize on the move, instead met with some fresh supply near the 1.1700 round-figure mark.

The shared currency was being weighed down by the imposition of fresh lockdown measures in the Eurozone’s two largest economies – Germany and France – and the ECB’s clear signal to ease further by the end of this year. The euro bulls largely shrugged off upbeat German and Eurozone GDP reports. In fact, the German economy recorded a growth of 8.2% in the third quarter of 2020 and the Eurozone GDP grew 12.7% during the reported period. Investors, however, feared that stronger economic growth in the region will prove transitory amid the second wave of COVID-19 infections.

On the other hand, the US dollar retained its safe-haven status amid growing market worries about the economic fallout from the continuous surge in coronavirus cases. This, along with the prevalent cautious mood across the global financial markets further benefitted the greenback’s relative safe-haven status against its European counterpart. Meanwhile, the uncertainty about the actual outcome of Tuesday’s US presidential election held the USD bulls from placing aggressive bets, albeit did little to lend any support to the major.

The steady downtick extended through the Asian session on Monday and has now dragged the pair back closer to September monthly swing lows. Market participants now look forward to the release of the final Eurozone PMI prints for some impetus. Later during the early North American session, the release of the US ISM Manufacturing PMI will influence the USD price dynamics and also contribute to producing some trading opportunities. The momentum, however, is likely to remain restricted as investors might refrain from placing any aggressive bets as the focus remains on the US election.

From a technical perspective, the 1.1615-10 region seems to be the next relevant target for bearish trades. Some follow-through selling below the 1.1600 mark should pave the way for an extension of the recent downward trajectory towards testing the 1.1500 psychological mark, with some intermediate support near the 1.1565-60 area.

On the flip side, any meaningful recovery attempt might continue to confront a stiff resistance and remain capped near the 1.1700 mark. That said, a sustained move beyond might trigger a short-covering move and lift the pair back towards a one-month-old ascending trend-line support breakpoint, around the 1.1740 region. Above the mentioned support-turned-resistance, the pair is likely to accelerate the positive move towards the 1.1780 level en-route the 1.1800 round-figure mark.

2) GBP/USD: Break Below 1.2880-70 To Pave The Way For Further Weakness

The GBP/USD pair gained some positive traction on Friday and moved away from two-week lows touched in the previous session. In the absence of any negative Brexit headlines, a mildly softer tone surrounding the US dollar was seen as a key factor driving the pair higher. The greenback was pressured by the uncertainty about the actual outcome of the US presidential election. However, concerns about the potential economic fallout from the ever-increasing coronavirus cases helped limit the USD downfall and capped the upside for the major.

The pair struggled to capitalize on its uptick and remained capped below the key 1.3000 psychological mark. The pair finally settled around 35-40 pips off daily swing highs and opened with a modest bearish gap on the first day of a new trading week on the back of the second national lockdown in the UK. Britain’s Prime Minister Boris Johnson on Saturday announced a lockdown across England until December 2 to curb the second wave of COVID-19 infections. A senior cabinet member said on Sunday the lockdown could be extended, which, in turn, took its toll on the British pound.

Concerns about the economic fallout from the coronavirus-induced overshadowed the latest optimism over a soft Brexit. It is worth reporting that EU and British Brexit negotiators will continue talks in Brussels on Monday and until around mid-week. The continuation of intensive talks is now seen as a sign that both sides are still pushing to avoid a damaging breakdown in trade and seal a new partnership agreement before the end of UK’s transition period at the end of this year.

Nevertheless, the pair was last seen hovering near the 1.2900 mark during the Asian session on Monday and remains at the mercy of developments surrounding the coronavirus saga. In the meantime, the release of the final UK Manufacturing PMI and any Brexit-related updates will influence the British pound. Later during the early North American session, the US ISM Manufacturing PMI will also be looked upon for some trading impetus. The key focus, however, will be on Tuesday’s US presidential election, warranting some caution before placing aggressive directional bets.

From a technical perspective, some follow-through selling below the 23.6% Fibonacci level of the 1.3482-1.2676 downfall will be seen as a fresh trigger for bearish traders. The pair might then accelerate the slide towards the 1.2800 mark before eventually dropping to the next major support near the 1.2735-30 region. This is closely followed by the very important 200-day SMA, currently around the 1.2710 region, which if broken decisively will set the stage for an extension of the near-term depreciating move.

On the flip side, any meaningful recovery attempted might now confront a stiff resistance near the 1.2980-90 region (38.2% Fibo. level). That said, a sustained move beyond the 1.3000 mark might prompt some short-covering move and lift the pair further towards 50% Fibo. level, around the 1.3075-80 region. This is closely followed by the 1.3100 mark, above which the pair seems all set to aim back to retest recent daily closing highs resistance near mid-1.3100s.

3) XAU/USD: Gold Looks South As US Election Jitters Buoy The Dollar

Gold (XAU/USD) rebounded on Friday but closed the week in the red, well below the critical $1900 level. The bright metal showed some signs of life on Friday after the US dollar retreated across the board amid repositioning into the monthly closing and ahead of the crucial US Presidential election. However, growing risks of the coronavirus resurgence in Europe and the US put a floor under the greenback while limiting the upside in gold. Meanwhile, uncertainty over the election outcome also continued to lend support to the dollar bulls.

Starting out a big week this Monday, gold holds onto the recent gains although it has formed Doji candlestick on the daily chart, indicative of the weakening bullish pressure. The greenback will continue to draw bids as jitters set in across the financial markets ahead of Tuesday’s election, with markets favoring the safe-harbor dollar. The outcome of the election will determine the extent of the likely fiscal stimulus aid, which will pave the way for the next direction in gold. In the meantime, the global coronavirus statistics and US ISM Manufacturing PMI be eyed for fresh trading impulse.

Looking at the hourly chart, gold has regained ground above the 50-hour moving average (HMA) at $1876 but the upside attempts remain capped below the downward-sloping 100-HMA at $1887.

The price continues to waver within a rising wedge formation after falling sharply on Wednesday. The hourly Relative Strength Index (RSI) has turned south at 53.00, looking to threaten the midline, suggesting that the recovery momentum may have lost legs.

Acceptance below a cluster of healthy support levels around $1875 is needed to resume the downtrend towards the next critical cap at $1860. A technical breakdown on the chart will fuel the downside.

On the flip side, a sustained break above the 100-HMA barrier could expose the falling trendline resistance at $1891. At the level, the 100-daily moving average (DMA) coincides.