Image Source: Unsplash
 

Stock markets remained largely stable, while an air of uncertainty persisted in currencies and bonds as investors awaited the outcome of the United States' presidential election, which appeared to be a close race according to surveys. Oil prices rose overnight due to delays in producers' plans to raise supply, with Brent oil futures trading at $75.08 per barrel following a 3% increase on Monday. Asian equities largely advanced, with Japan's Nikkei index surging over 1% as traders resumed trading after an extended holiday break. After Chinese Premier Li Qiang expressed complete confidence in the nation achieving its economic targets this year and the potential for additional stimulus, the Shanghai Composite index in China increased by about 2.4%, and the Hang Seng index in Hong Kong increased by about 2.3%. The Standing Committee of the National People's Congress, the country's highest legislative body, is expected to announce a specific figure for the stimulus during its meeting this week. A private survey revealed that China's service sector activity experienced the fastest growth rate since July, which implies that consumer demand may be on the rebound. The dollar experienced a decline as the close presidential race resulted in the unwinding of "Trump trades." Gold experienced a slight decline as a result of diminished anticipations of interest rate reductions.

The US election day has finally arrived; since mid-September, US Treasury yields have been rising as Trump's chances of victory have recovered. This suggests a 'Trump trade' is associated with higher yields, likely due to the threat of import tariffs. The Open Interest Positioning Indicator shows this move to higher yields has been characterised by the closing of long positions in 10yr UST futures, rather than the opening of new shorts, especially in October. This indicates a reduction in risk exposure leading up to the election, which makes sense given the closeness of the opinion polls. The impact on markets will depend not only on the election outcome, but also the potential for continued uncertainty in determining the final result.

The impact of the US election on the UK rates market ahead of the Bank of England meeting may be more evident in the GBP/EUR spread than in the outright levels. The UK's sensitivity to US rates markets could affect the BoE's decision and future policy guidance. The relative performance of the UK rates market compared to the EUR rates market may provide more insight into the outcome of the BoE meeting, as both should be impacted by the US election news to a similar extent. The 10-year gilt-Bund spread at over 200 bps suggests that UK rates markets are already braced for a hawkish MPC.

Strategists predict that the dollar will strengthen if Trump wins and weaken if he does not, with the exception of bitcoin, which is anticipated to increase in value due to Trump's perceived leniency on crypto regulation. Options implied volatility for the offshore yuan against the dollar was at record highs, reflecting the tension and ambiguity regarding the potential consequences of another protectionist shift from the United States on global trade.The battleground states of Georgia, North Carolina, Pennsylvania, Michigan, Arizona, Wisconsin, and Nevada will be the primary focus upon the release of the results. The polls in Georgia shut at midnight GMT.
 

Overnight Newswire Updates of Note

• RBA Keeps Cash Rate Steady At 4.35%; As Expected
• Australian Services Activity Expands In October
• China’s Deputy Projects Confidence in Economic Recovery
• China Set To Issue Dollar Bonds Offshore After 3Y Hiatus
• China Reviews Plan To Increase Local Government Debt
• China Caixin PMI Signals Pickup in Service Sector Activity
• Japan PM Vote; Parties Intensify Lobbying Ahead Of Next Week
• RBNZ: New Zealand’s Economic Downturn Could Get Worse
• Ahead Of US Election, Asians See Little Difference Policies
• BofA CEO: US Economy Will Maintain Steady 2% Growth In 2025
• UK Chancellor To Join EU Finance Meeting Next Month
• Boeing Union Accepts Latest Contract Offer Ending Strike

          (Sourced from reliable financial news outlets)
 

FX Options Expiries For 10am New York Cut 

(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

• EUR/USD: 1.0850 (2BLN), 1.0870 (285M), 1.0900 (1.7BLN), 1.0925 (543M)
• 1.0950 (1.3BLN)
• USD/CHF: 0.8605 (405M), 0.8640 (430M), 0.8690-0.8700 (667M), 0.8750 (896M)
• EUR/GBP: 0.8350 (391M), 0.8425-30 (817M)
• GBP/USD: 1.2940 (385M), 1.2950-60 (340M), 1.2975 (340M), 1.3000 (709M)
• AUD/USD: 0.6600 (715M). NZD/USD: 0.6000 (410M)
• USD/CAD: 1.3905 (587M)
• USD/JPY: 152.00 (1.1BLN) , 152.25 (200M), 152.50 (510M)
   

CFTC Data As Of 1/11/24

• Net USD G10 long +$8.88bn to +$18.7bn in Oct 23-29 IMM period; $IDX +0.13%
• EUR +0.17%: speculative positions decreased by 21.8k contracts, now at -50.3k, lower ECB view weighs on EUR
• JPY +1.55%; speculative positions decreased by 37.6k contracts, now at +25k, on hawkish Fed, less dovish BoJ
• GBP +0.27%; speculative positions decreased by 8.2k contracts, now at +66.4k; less-dovish BoE lends support. Note large sterling dip post-budget not accounted for in this report
• CAD +0.62%; speculative positions decreased by 26.9k contracts, now at -168k; shorts eyes July ATH -196k
• AUD -1.78%; speculative positions decreased by 163 contracts, now at +27.5k; for now RBA least dovish c.bank
• Equity fund managers cut S&P 500 CME net long position by 20,435 contracts to 1,045,389
• Equity fund speculators trim S&P 500 CME net short position by 12,576 contracts to 292,035
• Speculators increase CBOT US 10-year Treasury futures net short position by 52,992 contracts to 901,183
   

Technical & Trade Views

SP500 Bullish Above Bearish Below 5745

• Daily VWAP bearish
• Weekly VWAP bearish
• Below 5720 opens 5660
• Primary support 5660
• Primary objective 5950

(Click on image to enlarge)

EURUSD Bullish Above Bearish Below 1.09

• Daily VWAP bullish
• Weekly VWAP bearish 
• Above 1.09 opens 1.0980
• Primary support 1.0750
• Primary objective 1.0750

(Click on image to enlarge)

GBPUSD Bullish Above Bearish Below 1.3050

• Daily VWAP bullish
• Weekly VWAP bearish
• Below 1.29 opens 1.27
• Primary support is 1.29
• Primary objective 1.31

(Click on image to enlarge)

USDJPY Bullish Above Bearish Below 148

• Daily VWAP bullish
• Weekly VWAP bullish 
• Below 148 opens 144
• Primary support 148
• Primary objective is 156

(Click on image to enlarge)

XAUUSD Bullish Above Bearish Below 2680

• Daily VWAP bearish
• Weekly VWAP bullish
• Below 2670 opens 2600
• Primary support 2550
• Primary objective is 2800

(Click on image to enlarge)

BTCUSD Bullish Above Bearish Below 69500

• Daily VWAP bullish
• Weekly VWAP bullish
• Below 69000 opens 64000
• Primary support is 58000
• Primary objective is 80000

(Click on image to enlarge)

More By This Author:

FTSE Green Start To A Busy Week, NatWest At 3yr Highs On Broker Upgrade
S&P 500 Weekly Action Areas & Price Objectives
Daily Market Outlook - Monday, Nov. 4