FX Commentary – Investors Await US Election Results

Market Talk

  • The U.S. dollar hovered near a one-month high on Tuesday as investors flocked to the safety of the greenback on Election Day in the United States so that they are well positioned to take advantage of volatility when results arrive.
  • Opinion polls have consistently showed Democrat challenger Joe Biden leading President Donald Trump. Analysts said a Biden win could weaken the dollar as he intends to spend big on stimulus, while a steadier foreign policy could lift trade-exposed currencies.
  • U.S. manufacturing activity accelerated more than expected in October, with new orders jumping to their highest in nearly 17 years, while Chinese factory activity expanded the fastest in a decade and euro zone manufacturing also sped up.
  • Australian dollar fell from $0.7054 to $0.7028 after the RBA cut interest rate to 0.1% from previously 0.25%. The RBA will also increase its bond buying program by A$100B but these moves were widely anticipated by the market.
  • Gold was down on Tuesday morning in Asia, with all eyes now on the outcome of the U.S. election and its potential uncertainties swirling about the outcome. However, COVID-19 surge across Europe and the U.S. is giving rise to concerns over economic pressures pushing gold prices down.

Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation
2. Buy NZD/USD at 0.6625. Stop at 0.6590 and target at 0.6680
3. Better managed COVID-19 situation is likely to benefit the NZD dollar while weighing on the US dollar.
4. Price is breaking out of a trend line with momentum indicators confirming the change in trend direction

Fundamental Comments
1. COVID-19 situation in NZ is better than the US which is favouring the NZD
2. After flocking to the greenback before US election, investors are likely to move out of the US dollar and into riskier currencies after the US election.

Technical Comments
1. Price is breaking out of a downtrend line which is a hinting of a change in price trend.
2. Momentum indicators are showing divergence warnings of a potential price trend reversal.

Key Levels


Technical Overview

USD/JPY – Price has been in a sideways trading range and we are near to the topside of the range at 105.00. Stochastic has a bearish crossover in the overbought zone and is hinting of a price decline ahead, MACD is still bullish but we are likely to see a bearish crossover soon, which is a hint of more price declines ahead. We think price is likely to be capped below 105.05 for another decline to 104.25.

Support 104.55105.20104.90
Resistance 104.85105.05105.35

EUR/USD – Price is testing the strong resistance line at 1.1660 and a break of this resistance is likely to send price higher to 1.1705. MACD has turned bullish but Stochastic is near to the overbought zone. 20EMA is now pointing higher which is a hint of more price upsides ahead. If price is unable to move above 1.1760, we are likely to see a decline to 1.1620. We prefer a breakout to 1.1705.

Support 1.16201.15801.1540
Resistance 1.16651.16951.1730

GBP/USD – Price reached a low of $1.2854 overnight and there were divergence warnings given by both Stochastic and MACD indicators. This could be a warning of a potential low in price and a reversal is in store. A Hammer candlestick price pattern also enhanced this possible price low reversal. A rally could bring price higher to 1.3060. Below 1.2840 is likely to send price lower to 1.2775.

Support 1.29001.28601.2825
Resistance 1.29451.29901.3025

XAU/USD – As price moved above $1889.60 resistance, our bearish view for $1848 was negated. We think the 3-wave correction ended at $1859 and price could be on its way up again. However Stochastic is near to the overbought zone and MACD is at its extreme, we think a price correction is likely before the rally resumes again. If price stays above 1873, we are likely to see $1908 in the next few days ahead.

Support 1884.901874.351866.25
Resistance 1898.401908.901920.20

USD/CAD – We had a buy call on this pair yesterday but our view was wrong. Our stop was triggered and we lost 35 pips as a result. Price dropped to a low of 1.3206 and Stochastic is in the oversold zone. MACD is about to turned bearish. We think yesterday’s decline may not be over as yet and a move to 1.3175 is likely if price stays below 1.3290 in the next couple of days ahead.

Support 1.32001.31751.31400
Resistance 1.32501.32851.3315

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