03-Nov-2020

1) GBP/USD: Steadies Above 1.2900 As Investors Await The Outcome Of US Elections
2) XAU/USD: Gold Bulls Insist On US Election Day, Upside Appears Limited
3) EUR/USD: Bears Take A Brief Pause Ahead Of The US Presidential Election

1) GBP/USD: Steadies Above 1.2900 As Investors Await The Outcome Of US Elections

The British pound kicked off the new week on a downbeat note and was pressured by the imposition of the second nationwide lockdown in the UK. Britain’s Prime Minister Boris Johnson on Saturday announced the month-long restrictions across England until December 2 to curb the alarming pace of growth in new COVID-19 cases. The new measures added to the market worries about the potential economic fallout and might have increased pressure on the Bank of England to deliver more aggressive stimulus at this week’s policy meeting. This, in turn, took its toll on the sterling and prompted some fresh selling around the GBP/USD pair.

On the other hand, the US dollar continued attracting some haven flows and further contributed to the pair’s intraday slide to the lowest level since October 7. However, a combination of factors extended some support to the major and helped limit deeper losses. The continuation of intensive Brexit talks was seen as a sign that both sides are still pushing to seal a new partnership agreement before the end of the UK’s transition period at the end of this year. This, along with the upward revision of the UK Manufacturing PMI provided some respite to the GBP bulls and assisted the pair to attract some buying ahead of mid-1.2800s.

The pair recovered around 90 pips from daily swing lows, albeit lacked any strong follow-through as investors refrained from placing any aggressive bets amid the uncertainty about the actual outcome of the US presidential election. It is worth reporting that the incoming opinion polls have been indicating a strong lead for Democrat challenger Joe Biden over incumbent President Donald Trump. Investors, however, remain wary of predicting the actual outcome on the back of a narrow gap in battleground states. This, in turn, warrants some caution for aggressive traders and before placing fresh directional bets.

There isn’t any major market-moving economic data due for release, either from the UK or the US. That said, some repositioning trade ahead of the key event risk might still infuse some volatility. Apart from this, any Brexit-related headlines will influence the GBP price dynamics and further assist traders to grab some short-term opportunities on Tuesday.

From a technical perspective, the pair managed to rebound from the 1.2855 confluence support, comprising of the lower boundary of a short-term descending channel and the 23.6% Fibonacci level of the 1.3482-1.2676 downfall. The mentioned region should now act as a key pivotal point for short-term traders and help determine the next leg of a directional move.

In the meantime, any subsequent recovery is more likely to confront a stiff resistance near the 1.2980-85 region. The mentioned barrier marks the 38.2% Fibo. level and the top end of the mentioned trend-channel, which if cleared decisively will negate any near-term bearish bias. Some follow-through buying beyond the key 1.3000 psychological mark will add credence to the positive outlook and lift the pair further towards the 1.3045-50 intermediate resistance en-route the 50% Fibo. level, around the 1.3080 region.

On the flip side, any meaningful slide below the 1.2900 mark might continue to attract some dip-buying near the 1.2855-50 region. Sustained weakness below might turn the pair vulnerable to accelerate the fall towards the 1.2800 mark before eventually dropping to the 1.2775 support. The downward trajectory could further get extended towards challenging the very important 200-day SMA, currently near the 1.2710 region.

2) XAU/USD: Gold Bulls Insist On US Election Day, Upside Appears Limited

Gold (XAU/USD) extended its rebound into a third straight session on Monday, although remained below the $1900 mark. Gold held firm as surging coronavirus cases globally and caution ahead of the US election boosted gold’s safe-haven appeal. Further, a retreat in the US dollar from five-week highs amid a rally in Wall Street also backed the strength in the yellow metal. The US stocks advanced following upbeat Chinese and US ISM Manufacturing PMI reports. However, the bulls failed to take out the $1900 barrier, undermined by falling US inflation expectations over the past two weeks, in absence of a new fiscal stimulus aid.

Looking ahead, gold’s fate hinges on the outcome of the 2020 Presidential election. The presidential race narrows in six swing states, as Joe Biden continues to hold a narrow lead over Donald Trump in the final stretch on Tuesday. In the meantime, a jittery market mood combined with rising coronavirus concerns could likely keep the precious metal in a familiar trading range.

The hourly chart shows that gold fails to find acceptance above the downward-sloping 200-hourly moving average (HMA).

The price charted an inverse head-and-shoulders breakout on the given timeframe but the further upside appears to lack follow-through, as sellers continue to lurk at $1900.

Recapturing the latter is critical to unleashing more gains, with a test of the pattern target at $1910 due on the cards.

The 50 and 100-HMA bullish crossover adds credence to the bullish bias. The hourly Relative Strength Index (RSI) holds above the 50 level despite the latest leg down, leaving buyers hopeful.

On the flip side, acceptance below the 21-HMA at $1891 could trigger a sharp drop towards $1884, almost where the upward-sloping 50-HMA coincides with the 100-HMA.

3) EUR/USD: Bears Take A Brief Pause Ahead Of The US Presidential Election

The EUR/USD pair remained depressed for the sixth consecutive session on Monday and dropped to fresh multi-week lows, albeit lacked any strong follow-through selling. Concerns about the potential economic fallout from coronavirus-induced lockdowns in Europe kept the euro bulls on the defensive and drove some haven flows towards the US dollar. Growing market worries overshadowed encouraging European data, showing that the German Manufacturing PMI rose to a 31-month high level of 58.2. Adding to this, the Eurozone Manufacturing PMI was finalized at a 27 months high level of 54.8 in October, albeit did little to provide any meaningful impetus to the shared currency.

On the other hand, the USD buying interest picked up pace following the release of better-than-expected ISM Manufacturing PMI. In fact, the gauge surged to the highest level since September 2018 and came in at 59.3 in October. The rise of 3.9 points from the previous month’s reading of 55.4 was the second-largest since May 2009 and signaled a strong growth momentum in the US manufacturing sector. Despite the supporting factors, the USD bulls refrained from placing aggressive bets amid the uncertain US political environment. This, in turn, helped limit deeper losses, rather than assisted the pair to once again find some support ahead of the 1.1600 mark.

The pair continued showing some resilience at lower levels and managed to regain some positive traction during the Asian session on Tuesday. The uptick, however, lacked any strong follow-through as investors might opt to stay on the sidelines rather than betting outright on a particular result of the US election. It is worth reporting that the incoming opinion polls have consistently shown Democrat challenger Joe Biden leading Republican incumbent President Donald Trump. Investors, however, remain wary of predicting the actual outcome on the back of a narrow gap in battleground states. That said, some repositioning trade ahead of the key event risk might still infuse some volatility amid absent relevant market moving economic releases.

From a technical perspective, nothing seems to have changed much for the pair and the near-term bias still seems tilted in favor of bearish traders. However, the emergence of some buying ahead of September monthly swing lows warrant some caution, making it prudent to wait for some follow-through selling before positioning for any further depreciating move. A convincing breakthrough in the 1.1615-10 region, leading to a subsequent slide below the 1.1600 mark might now turn the pair vulnerable to accelerate the fall further towards the key 1.1500 psychological mark, with some intermediate support near the 1.1540-35 region.

On the flip side, the attempted recovery move might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the 1.1690-1.1700 region. Above the mentioned barrier, a fresh bout of short-covering has the potential to lift the pair back towards a one-month-old ascending trend-line support breakpoint, now turned resistance, currently near mid-1.1700s.