Caution freezes market movers – Market Overview – October 28

Caution freezes market movers – Market Overview – October 28

The risk aversion sentiment grows in the market, and EUR/USD breaks down its intermediate support levels without the ECB's need to express its intention to intensify its expansionary policy.

The risk aversion sentiment grows in the market, and EUR/USD breaks down its intermediate support levels without the ECB's need to express its intention to intensify its expansionary monetary policy.

The severe worsening of Europe's epidemiological situation is the main factor causing this situation, with the lockdown of the leading European capitals and the certain possibility that we will return to total confinement. But the proximity of the North American elections is also another factor that is influencing investors' mood, especially due to the possibility of a challenge to the electoral results by Trump, something that the current president does not rule out and manifests openly.

At tomorrow's ECB meeting, and given the current circumstances, it is highly likely that President Lagarde will hint at some kind of additional monetary stimulus measure, which would cause the current pressure on the Euro to intensify. To watch the main support around 1.1700, below which it makes way for further losses to the levels of 1.1610.

In this risk-off scenario in the market, investors flee in search of safe havens, which is reflected above all in fixed income.

As we can see in the graph, Tnote10, a 10-year American bond, has reversed its downward trend, and since the last few days, it is strongly bought by investors up to the yield levels of 0.75% today, after having reached 0.87% at the beginning of last week.

This buying flow of fixed income can intensify in the days before the elections and with a particular force if there is a confrontation between the two candidates over the polls' outcome. In terms of price, the US bond could reach the first resistance zone at 139.40 and even up to 139.75.

Crude Oil

An asset that is being damaged in this context of uncertainty is OIL.

Market expectations regarding the demand for crude oil are low, significantly if restrictive mobility measures are tightened, as we are witnessing in Europe.

The market expects OPEC + to extend their production cuts over time, but that is something that will be discussed at the end of next month and the outcome of which is uncertain, especially if we take into account the lack of consensus that these types of meetings have experienced in past occasions.

At the moment, crude oil has almost a week of consecutive losses, and its price is holding above the 200-day SMA at $ 37.54. This support level's loss would lead to falls to the 36.00-36.20 area, where it is its next support level.

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