05-Nov-2020

1) GBP/USD Remains Capped Below 1.3000 Mark Post-BoE
2) XAU/USD:  Technicals, US Election Limbo Favor XAU/USD Ahead Of FOMC
3) EUR/USD: US Election-Led Volatility Subsides, Risk-On Mood Remains Supportive

1) GBP/USD Remains Capped Below 1.3000 Mark Post-BoE

The GBP/USD pair rallied around 60-65 pips post-BoE announcement and shot to fresh session tops, around the key 1.3000 psychological mark, albeit lacked follow-through.

The pair extended the previous day’s sharp intraday pullback from near two-week tops, around the 1.3140 region, and witnessed some follow-through selling through the Asian session on Thursday. The GBP/USD pair, however, stalled its intraday slide and managed to rebound swiftly from the 1.2930 area after the Bank of England decided to leave benchmark interest rates unchanged at 0.10%.

The supporting factor, to a larger extent, was offset by a larger than expected increase in the size of the BoE’s asset purchase program, which now stands at £875 billion, up from £745 billion prior. Adding to this, the UK central bank also showed readiness to increase QE further if market functioning worsens and said that risks to the economic recovery remain skewed to the downside.

Meanwhile, the GBP/USD pair struggled to capitalize on the attempted recovery move and was last seen trading with modest losses, around the 1.2970 region. Even a mildly softer tone surrounding the US dollar failed to impress bulls or provide any meaningful impetus. The greenback suffered a blow after former vice president Joe Biden increased his lead in a nail-biting US election.

Moving ahead, the focus now shifts to the FOMC monetary policy update, scheduled to be announced later during the US session. This, along with US political developments, will influence the USD price dynamics and produce some short-term trading opportunities around the GBP/USD pair.

2) XAU/USD:  Technicals, US Election Limbo Favor XAU/USD Ahead Of FOMC

With the US election outcome still elusive, although titling towards a Joe Biden presidency, Gold (XAU/USD) firmed on Thursday. Gold was largely pressured through the major part of Wednesday’s choppy trading but the buyers remained hopeful following a daily close above the $1900 mark. The US dollar tumbled and lifted gold, as global markets cheered prospects for a Biden win, implying a bigger stimulus package and no higher taxes.

However, with the Trump campaign having filed legal suits over the voting count in several states fuel fears for a contested election while markets remain worried about the increasing odds for a split government, as the Republicans look to retain the Senate on Biden at the White House. A split Congress could likely bring no end to the fiscal gridlock. The market nervousness is seemingly boding well for the traditional safe-haven gold, as the final results are eagerly awaited from the key swing states.

Gold traders also await the US Jobless Claims data and the FOMC monetary policy decision for a fresh direction on the yellow metal. The Fed is likely to hold its stance on the easy policy, assessing the implications of the US election and the coronavirus resurgence.

The hourly chart shows a symmetrical triangle confirmation but a strong catalyst is waited for the bulls to extend their control above the pattern resistance of $1907.

The bullish case is backed by the hourly Relative Strength Index (RSI) inching higher at 56.58 while within the positive zone. Also, the 21-hourly moving average (HMA) and 50-HMA bullish crossover adds credence to the further upside.

The next stop for the bulls is seen at Wednesday’s high of $1916.50, above which the $1920 hurdle will get tested.

To the downside, the upward-sloping 21-HMA at $1903 is immediate support. A breach of the last could put the $1900 level back at risk. Further south, the confluence of the 100 and 200-HMA at $1893 is the level to beat for the bears.

3) EUR/USD: US Election-Led Volatility Subsides, Risk-On Mood Remains Supportive

The US presidential election triggered significant volatility in the markets and led to some sharp movement for the EUR/USD pair in both directions. Investors rushed to readjust their portfolios after early results indicated that the race for the White House was far tighter than expected as against the market bets for a so-called “blue wave”. This, in turn, drove some aggressive flows towards the US dollar and dragged the pair to the lowest level since July 24, around the 1.1600 mak. The downfall, however, turned out to be short-lived amid the emergence of some fresh USD selling.

The greenback struggled to preserve its gains, instead suffered a blow after former vice president Joe Biden increased his lead over the incumbent President Donald Trump. This, coupled with a solid intraday rebound in the equity markets, further undermined the USD’s relative safe-haven demand. The intraday selling pressure around the buck picked up pace following the disappointing release of the ADP report, which showed that the US private-sector employers added only 365k in October. This was well below market expectations for 650K and worse than September’s reading of 753K.

Separately, the US ISM Services PMI edged higher to 56.9 in October as compared to the 56.0 expected and previous. The better-than-expected print, to a larger extent, was negated by the employment sub-component, which fell 1.7 from 51.8 previous to 50.1 in October and did little to impress the USD bulls. Nevertheless, the pair recorded a strong intraday recovery and finally settled marginally above the 1.1700 mark. The momentum extended through the Asian session on Thursday and remained well supported by a softer tone surrounding the USD.

Meanwhile, the final outcome of the US election now hangs on the vote count from a few remaining swing states. Moreover, Trump has already pursued lawsuits and a recount in Pennsylvania and Michigan. The heightened uncertainty could prolong for days or even weeks, which continued exerting some pressure on the greenback and remained supportive of the pair’s uptick. Hence, the key focus will remain on US political developments. Later during the US session, the latest FOMC monetary policy update might influence the USD price dynamics and produce some trading opportunities, though is unlikely to prove to be a major game-changer for the pair.

From a technical perspective, the overnight sharp rebound from the 1.1600 mark and the subsequent positive move might have shifted the bias in favour of bullish traders. That said, the pair’s inability to move back above the 50-day SMA warrants some caution before positioning for any further appreciating move. Hence, it will still be prudent to wait for some follow-through buying beyond the 1.1770-75 region, above which the pair is likely to surpass the 1.1800 mark and aim towards testing the next major hurdle near the 1.1865-70 region.

On the flip side, the 1.1700 round-figure mark now seems to protect the immediate downside. This is followed by support near the 1.1640 horizontal level, which if broken decisively will negate any near-term positive bias and turn the pair vulnerable. The pair might then slide below the 1.1600 mark and aim towards testing the next major support near the key 1.1500 psychological mark.