Wednesday November 4th, 2020

Market volatility increases as the US election proves too close to call. The US President initially claimed victory, but with votes still to be counted rival Biden expressed confidence he will win. The US election remaining too close to call, the US President saying they will go to the Supreme court which has seen investors return to US$ safe haven buying. CNY is down 0.15% while Asian currencies are down 0.2% on average vs US$. The trading currencies remain volatile with JPY down 0.1%, NOK down 0.45%, AUD & ZAR are down 0.6%, NZD down 0.8% and MXN is down 0.9% vs US$. A number of key market data releases including US ADP Employment, US Trade Balance, ISM Services PMI and tomorrow is the FOMC Fed rate decision. Intraday election updates will continue to dominate market direction in the days to come. 

Oil prices rallied after the US Presidents early victory announcement and prices are holding up 2.5% at the start of trading. On a Biden win, oil will likely come under renewed pressure with the prospect of relaxed restrictions on Iranian oil. C$ had a volatile overnight session trading 1.3091 – 1.3299 overnight. Stronger oil prices helped the C$ recover from its lows, but we expect more volatility until the election results are known. Our bias to both buyers & sellers is to pick your levels and take advantage of any volatility. 

The Euro by contrast to the C$ had a much less volatile session trading between 1.1602-1.1768 and is opening at 1.17 level. The US elections will continue to dominate the short-term direction of Euro, but longer term the impact of covid-19 lockdowns will have a greater impact. The ECB’s policy maker De Cos said coronavirus restrictions may lead to economic contraction in Europe. De cos went to say it’s likely the ECB could implement new measures in December. Support at 1.1625 with resistance extending to 1.1800.

GBP initially under pressure fell to 1.2901 on safe-haven US$ buying but rebounded on Brexit news. The EU & UK have agreed to extend the Brexit talks after reports of positive progress. In the bigger picture positive Brexit news will outweigh the US election uncertainties. A breakdown in Brexit talks at this point would be extremely negative for GBP. Support at 1.2880 with resistance at 1.3150.