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Dollar down Ahead of Chinese Quarterly Growth Data Release By Investing.com

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© Reuters.

By Gina Lee

Investing.com – The dollar was down on Monday morning in Asia, with China due to release quarterly growth data, including and readings, later in the day, despite fading hopes for the latest fiscal stimulus package to be passed by the U.S. Congress ahead of the Nov. 3 U.S. presidential elections.

The that tracks the greenback against a basket of other currencies inched down 0.04% to 93.672 by 9:40 PM ET (1:40 AM GMT), following a 0.7% rise the previous week over surging numbers of COVID-19 cases and the impasse in Congress.

The pair inched up 0.01% to 105.41.

The pair gained 0.36% to 0.7106. The pair was up 0.32% to 0.6625, after the NZD showed little reaction to Prime Minister Jacinda Arden’s Labor party cinching a landslide victory on Saturday.

The risk-sensitive Antipodean currencies saw gains over expectations that the Chinese data will show strong growth for the quarter. Investors are hoping that a strong recovery in the world’s second largest economy will strengthen demand amid rising COVID-19 cases and the re-introduction of restrictive measures such as lockdowns.

Although the People’s Bank of China introduced policies to stem the yuan’s recent rise during the previous week, the expectations have boosted the currency over its 18-month high of 6.6788. The pair edged down 0.12% to 6.6883.

The pair edged up 0.20% to 1.2938.

Despite House of Representatives Speaker Nancy Pelosi setting a Tuesday deadline for Congress to reach consensus on a deal before the election, most investors remain doubtful that the deadline will be reached as a Joe Biden victory looks imminent. A bide

But enthusiasm was tempered by the opposition of Senate Republicans and as investors focused on what the election outcome means for stimulus later, with a Joe Biden victory seen weakening the dollar by boosting sentiment with big spending.

“Fiscal remains the buzzword … but forget the Republicans’ move to pass a $500 billion bill, it will not see the light of day, and expectations of a new stimulus bill have been pushed into 2021,” Pepperstone head of research Chris Weston told Reuters. With around two weeks left until Nov. 3, national polls show Democrat candidate leading incumbent President Donald Trump by around ten points. The two men will square off at a final debate scheduled for Thursday.

“Markets will be attentive to any potential shift in polls, although traditionally the last debate has less impact in public opinion … the main risk for markets now would be a tightening in polls, which would reduce the likelihood of a large Democratic fiscal stimulus package and could raise the likelihood of a long-contested election,” Barclays (LON:) analysts said in a note.

Meanwhile, Pelosi and Treasury Secretary Steven Mnuchin discussed stimulus package efforts via a phone call on Saturday and are due to speak again later in the day. Trump has also renewed his offer to up the package’s price tag.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Forex

XAUUSD Coils Ahead of Next Big Break

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Gold Price Forecast Talking Points:

  • Gold prices remain in a falling wedge pattern that’s been building for more than two months.
  • Ahead of this recent digestion, Gold prices were breaking out with aggression, setting a fresh all-time-high in early-August. Are bulls waiting to drive that next break?
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

Last week saw Gold prices tease a bullish breakout. But, buyers stepped back before a re-test of the prior October high and, so far, Gold prices have continued in the digestion backdrop that’s become commonplace over the past two months.

As looked at last week, Gold prices remain in a falling wedge pattern after the bullish breakout drove through the August open. This isn’t the first time that Gold prices have formed a falling wedge during this recent bullish cycle, as similar scenarios presented itself in Feb-May of last year and then again from September-December. Such formations will often be approached with the aim of bullish breakouts, begging the question as to whether or when buyers might be ready to resume the bigger picture trend in the yellow metal.

Gold Forecast

Gold Forecast

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To learn more about falling wedges, check out our DailyFX Education section.

Gold Daily Price Chart

Gold Daily Price Chart

Chart prepared by James Stanley; Gold on Tradingview

Gold – Deeper Support Potential

On a shorter-term basis, there could be scope for a deeper pullback while that longer-term wedge remains in-play. Price action in Gold appears to be slipping below the bottom-side of the 1900-1920 zone, and underneath price action is another area of possible support running from 1859-1871. This zone is what helped to catch the low in early-August, and came back into play in late-September. Prices in Gold could dip down to this zone while still remaining above the September swing-low; setting the stage for another run at resistances of 1900, 1920 and eventually 1933 (the October swing-high).

Top Trading Opportunities in 2020

Top Trading Opportunities in 2020

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Gold Four-Hour Price Chart

Gold Four Hour Price Chart

Chart prepared by James Stanley; Gold on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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How Will the Election Affect the Stock Market? Dow Jones Forecast

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Dow Jones Price Outlook:

  • Data from the last ten Presidential elections reveals the Dow Jones Industrial Average typically climbs around an election
  • Still, it is difficult to attribute any equity strength to an election singlehandedly as an infinite number of themes are at play in the market at any given time
  • Dow Jones: A True Cross Section of American Industry?

How Will the Election Affect the Stock Market? Dow Jones Forecast

Global stock markets have been on a wild ride in 2020 thus far, juggling the coronavirus and the various monetary and fiscal decisions central banks and governments have made in response. If a global pandemic were not enough, the Dow Jones, Nasdaq 100 and S&P 500 will have to negotiate a looming Presidential election – an event that frequently dominates media and popular culture in the lead up. While it may feel like the election and its social implications can take over everyday life, what impact has it had on the stock market in the past?

Dow Jones Performance in the 12-Months Before and After a Presidential Election

dow jones price chart in election years

Data Source: Bloomberg. Compiled by Peter Hanks

With the assistance of data from the last ten US Presidential elections, history reveals the stock market – more specifically the US benchmark Dow Jones index – typically rises on average before, during and after an election. That being said, there are a few caveats for which we must account. First and foremost, stocks generally rise over time in general, with the 30-year annualized return of the S&P 500 at roughly 8%. Similarly, the 30-year annualized return of the Dow Jones is slightly more than 5%.

Difference between Dow, Nasdaq, and S&P 500: Major Facts & Opportunities

With that in mind, seeing the Dow Jones rise modestly on average across ten presidential elections is not entirely surprising. To that end, drawing such conclusions from only a limited sample of data is presumptuous. Consequently, the saying that ‘past performance is not indicative of futures results’ is very apt for circumstances such as this where statistics cannot assure better equity performance than a non-election year.

Top 8 Forex Trading Strategies and their Pros and Cons

As displayed in the graph above, some years are dominated by themes other than the Presidential election. 1996, 2008 and 2020 are just three instances whereby external influences like the ballooning of the Dot-Com Bubble, the Great Financial Crisis and coronavirus respectively have (or are currently) exerted as much or more influence than the changing of the guard in the Oval Office – although the coming election may surprise yet.

Suffice it to say, 2020 has proven to be anything but ordinary and external factors like trade wars, monetary policy and the pace of the pandemic recovery may all have varying degrees of influence over the stock market. Further still, the trajectory of these themes could be altered significantly after the election – possibly changing the shape and scope of an issue like US-China relations or technology regulation. Undoubtedly then, stocks will have their hands full in the coming months and it is difficult to say that Presidential elections are a positive development for equities.

VIX futures price chart

One theme we can attribute to an election with more confidence is an increase in volatility. Elections and their potential impact on government and fiscal policy can create uncertainty – a phenomenon most investors detest. With uncertainty often comes volatility and this volatility can be observed in the October VIX futures contract as it reflects the lead up to the election. In the subsequent months’ contracts, the assumption of volatility in VIX pricing steadily declines as the election impact fades into the rearview.

Trading Forex News: The Strategy

Trading Forex News: The Strategy

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Trading Forex News: The Strategy

Thus, it can be surmised that an election’s impact on stock prices would inevitably fall with a general trend of strength, but expecting an increase in volatility may be the more likely outcome. As the election draws closer and potential policies are given more clarity, specific sectors may rise or fall depending on the forecasted outcomes. Healthcare, energy, technology and companies with sensitivities to US-China relations may all be subject to fundamental changes after the election.

Stocks like Amazon, AbbVie and Zoom are just a few examples of those with potentially heightened sensitivity to changes in the US administration, while corporations like Caterpillar, Boeing, Lulu and Walmart may be more closely aligned with the pace of economic recovery. Evidently, various themes to be negotiated around the election are already at play and divergent performances are likely.

S&P 500 price chart by month and vix price chart

Data source: Bloomberg. Compiled by John Kicklighter

With increased volatility to boot, these moves could see their magnitude increased regardless of direction, especially as trends in seasonality exacerbate election uncertainty. With the election drawing ever-closer, 2020 surely possesses the catalysts to differ from the typical election-year and trading opportunities are abound as a result. As the election nears, check back at DailyFX for election coverage from a macroeconomic perspective.

Open a demo FX trading account with IG and trade currencies that respond to systemic trends.

–Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX





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USDJPY May Rise as Stocks Trade Lower

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USD/JPY Analysis:

  • USD/JPY attempts to claw back last week’s losses
  • Bulls face long term challenges despite short term test of 105.00
  • Economic data this week: BoJ interest rate, US GDP and continuous jobless claims
  • Retail traders maintain long positioning despite increased weekly shorts

USD/JPY May Benefit from Risky Asset Sell-Off

After Thursday’s sharp decline, USD/JPY ended off the week lower but has already made an attempt to claw back some of those losses. The US dollar index traded slightly higher during the first half of the London session as investors exercise caution amidst continued increases in coronavirus and anticipated restrictions. Equity markets have witnessed a modest sell-off which can bode well for USD/JPY as investors may view it as a safe haven.

Challenges to an Extended USD/JPY Bullish Move

The weekly chart shows a long and steady decline in price since the beginning of April, as shown by the descending trendline with 105.00 presenting a key psychological level.

USD/JPY Weekly Chart Presenting a Long-Term View

USDJPY weekly chart

Chart prepared by Richard Snow, IG

The daily chart once more shows the 105.00 level which is the first level of support that needs to be overcome if the recent bullish momentum is to continue. A close above 105.00 would bring 105.35 into focus before a potential test of the descending trendline.

Failure to close above 105.00 may see another move down to the recent swing low at around 104.34 before potentially testing the 3-month low at 104.00

USD/JPY Daily Chart

USDJPY chart

Chart prepared by Richard Snow, IG

Risk Events for the Week Ahead

The US announce Q3 GDP data and provide an update on continuous jobless claims while the Bank of Japan have an interest rate announcement where it is widely expected that rates will remain unchanged. US GDP is expected to see a significant increase after Q2’s disappointing -31.4% figure (annualized).

DailyFX econ calendar

Retail Trader Data Weighted to the Short Side

USDJPY sentiment



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily 5% 18% 9%
Weekly 14% -28% -4%

  • USD/JPY: Retail trader data shows 66.23% of traders are net-long with the ratio of traders long to short at 1.96 to 1. The above chart has stripped away price action to provide a clearer view of current sentiment and the evolution of sentiment over time
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/JPY prices may continue to fall.

How to Use IG Client Sentiment in Your Trading

How to Use IG Client Sentiment in Your Trading

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  • The number of traders net-long is 6.58% higher than yesterday and 15.65% higher from last week, while the number of traders net-short is 20.09% higher than yesterday and 20.97% lower from last week.
  • Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed USD/JPY reading.

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX





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