News & Analysis

Overnight on Wall Street: Thursday 29 October 2020

October 29, 2020

By Deepta Bolaky
 @DeeptaGOMarkets

Equity Markets

The bloodbath in the stock market continues as more countries are set to go into national lockdowns again following the surging number of COVID-19 cases.


Source: Bloomberg

The second wave of an outbreak in Europe is threatening to heavily affect the fourth quarter if stricter measures are not put in place to curb the rapid spread of infections. European equities fell to months low overnight.

Major US equity indices pulled more than 3% yesterday- the most in two months as the global pandemic and the uncertainties around the presidential elections rattle the US sharemarket.

  • The Dow Jones Industrial Average lost 943 points or 3.4% to 26,520.
  • S&P500 fell by 120 points or 3.5% to 3,271.

  • Nasdaq Composite erased 426 points or 3.7% to 11,005.

Currency Markets 

In the FX space, safe-haven currencies rallied higher in a classic reaction of seeking safety following the rout in the equities market. Major currencies were weaker than the US dollar. Commodities-related currencies were among the hardest hit.


Source: Bloomberg

Commodities

Crude oil prices were underpinned by several bearish factors ranging from the sell-off in the stock market, surging COVID-19 cases and its impact on the demand outlook and bearish weekly reports. Crude oil stocks change came in at 4.32M, above expectations (1.23M) in October 23 as per the weekly inventory data released by EIA yesterday. As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) were trading at around $37.46 and $39.12 respectively. 

Gold

Despite the uncertainties and massive sell-off in the stock market, gold failed to attract buyers underpinned by the lack of clarity on the stimulus front. The precious metal fell below the key psychological level of $1,900 to trade around $1,877. 

For the chart of the day, Adam Taylor takes a look at the XAUUSD- Is Gold Losing Its Shine?

The London session saw a much weaker performance from XAUUSD today, as it plunged around 2% on the open to print a low of $1869 on the day. Perhaps as the US general election approaches, coupled with stimulus talk and ongoing COVID-19 concerns, we may be seeing the start of some volatile moves for the precious metal.

Today’s sharp decline on the hourly pushed Gold deep into oversold territory, as shown on the RSI indicator above. The price did somewhat recover heading into US trading hours but is still actively trying to discover traces of support.

Before this move, the chart above gave an important technical clue as to what may be in store for XAUUSD short-term. Notice how the price attempted to breach the currently weekly pivot level of $1910 multiple times before reacting with an abrupt change in direction. Generally speaking, price action will rarely challenge a critical level more than three times in quick succession before giving up and pursuing the path of least resistance.

While the short-term bearish sentiment lingers for XAUUSD, it seems less likely that we’ll see any significant bullish activity for the time being. Although considering it remains in oversold territory, we could see some consolidative patterns emerge and perhaps a retest of previous lows such as $1897 before a further decline. The nearest downside target following the low of $1870 looks to be in the area of $1848.

The reason I’m leaning towards longer-term bearishness too is because of what the daily Ichimoku chart is suggesting below. In mid-September, the price fell below the cloud and quite clearly has struggled to break back above. We’re also starting to see the cloud thicken in that $1910 region, increasing the potential for resistance and perhaps limiting bullish opportunities going forward.

Finally, I must stress that we are likely to see greater volatility levels in XAUUSD both before and after the US election. As some of these technical signals appear, a sensible approach to trading is required.

By Deepta Bolaky
 @DeeptaGOMarkets

Key upcoming events

  • Retail Trade, Large Retailers’ Sales, BoJ Monetary Policy Statement, Interest Rate Decision, Outlook Report and Press Conference (Japan)
  • NAB Business Confidence (Australia)
  • EU Leaders Summit, Consumer Confidence, Business Climate, ECB Interest Rate Decision, Deposit Rate Decision, Monetary Policy Statement and Press Conference (Eurozone)
  • Unemployment Rate, Change and Harmonized Index of Consumer Prices (Germany)
  • Fed’s Kaplan Speech, Core PCE, Jobless Claims, GDP Price Index, GDP and Pending Home Sales (US)
Friday, 30 October 2020 
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0 0 0.358 0.082 0.219 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 0 0 0


Disclaimer:  The articles are from GO Markets analysts,  based on their independent analysis or personal experiences. Views or opinions or trading styles expressed are of their own;  should not be taken as either representative of or shared by GO Markets.  Advice (if any),  are of a ‘general’ nature and not based on your personal objectives, financial situation or needs.  You should therefore consider how appropriate the advice (if any) is to your objectives, financial situation and needs, before acting on the advice.  If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.

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