October 28, 2020 6:51:51
Market Update – 28th October 2020
US election polling – Real Clear Politics have Trump on 48 and Biden 44 in Florida, one of the key battle states. News breaking this morning has pushed US equities lower as the gap between Biden and Trump narrows. Clearly, the market does not like the possibility of a Trump victory. If the gap between Trump and Biden continues to narrow, there is a possibility of a contested election, Trump has warned he will not go willingly. The recent appointment of the Republican Supreme Court judge could be in preparation of a contested election.
The USD has gained across the board in the early Asian session with the EUR coming under pressure against the USD and JPY.
To add further pressure, across Europe, the threat of additional lockdowns has hit the Europen Indices with the DAX falling roughly 700 points since the Monday open. Germany is discussing a two-week corona-virus shutdown and the French President is considering a month-long national lockdown. We are yet to hear what measure will be involved.
It appears as though there are a number of risk events weighing on the market. Market Sentiment appears to be changing, especially with the surging Covid-19 cases across Europe. The sentiment shift plays into the USD long positions. We are also faced with the ECB interest rate decision and statement this week. Investors are growing concerned about the speed at which the €750 billion Pandemic Emergency Purchase Programme is being rolled out across Europe. However, there are murmurs of the ECB increasing the size of the program, which is potentially keeping the EURUSD above water, for the time being.
EURUSD Technical Analysis
EURUSD – Daily Cahrts
The rising channel formation can be classed as a bear flag structure. We are currently questioning whether the full retracement in the EURUSD has occurred. If the ECB does not give an indication they are willing to increase the PEPP the risk-off flows may continue into the week’s end.
EURUSD – 1 Hour Charts
The EURUSD is approaching a crucial zone inside the rising channel formation. Depending on how the market takes the additional lockdowns this evening, there is a risk of a break lower on the pair. 1.1740 appears to be the crucial support zone.
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