Don’t blink, or you might miss the US aid deal final negotiation – Market Overview – October 20

By: Miguel A. Rodriguez

15:59, 20 October 2020

1603198373.jpg
All eyes are focused on the deadline that the United States House of Representatives president, Nancy Pelosi, has set as the maximum time to reach an agreement on the fiscal stimulus package

Until the end of today, investors will be attentive to a potential resolution of this long debate between the two North American parties.

The deadlines are not usually respected in the political sphere, so there is the possibility that a kick forward will occur again, maintaining the uncertainty for a long position.

But the proximity of the elections makes each day of delay count in a significant way.

An agreement in terms of the Democratic Party, with an amount of aid bigger than 2 trillion Dollars, would be positive for the stock markets and would pressure the US Dollar down.

To a certain extent, the market seems to be betting on this possibility with North American futures experiencing slight gains on the day, around 0.40% at the beginning of the session, something similar to yesterday. This denotes some hope, but remember that in yesterday's session, all initial gains fell back to the end the day.

The same is happening with the US Dollar, which is experiencing advances against all currencies except the Australian Dollar.

In this morning movement, EUR/USD has managed to overcome the 1.1800 barriers to 1.1820 but loses momentum in this area. Only the news of an agreement on the stimulus package that would harm the US Dollar would lead the pair to higher levels with resistance levels at 1.1838 and 1.1890.

In any case, although the long-awaited agreement is not reached these days, the proximity of the elections means that all attention is focused on the resulting possibilities according to electoral polls.

Democratic win might make the Gold surge

The polls point to a clear Democratic victory; however, the main point is if the Democrats achieve a majority in Congress and Senate since if this is the case, the stimulus package of more than $2 trillion would be approved in this new legislature.

In this case, the US Dollar would also be pressured downwards, something that would support  GOLD.

The precious metal forms an interesting technical pattern, as we can see in the chart, which is a bullish continuation triangle in the medium term.

The upward momentum that a large fiscal package would suppose, together with real interest rates at a minimum thanks to the expansionary policy of the Fed, would propitiate an upward break of this pattern with a close above 1920 and that would have as theoretical objective levels above recent record highs.

Share this article

This information prepared by capex.com/za is not an offer or a solicitation for the purpose of purchase or sale of any financial products referred to herein or to enter into any legal relations, nor an advice or a recommendation with respect to such financial products.This information is prepared for general circulation. It does not regard to the specific investment objectives, financial situation, or the particular needs of any recipient.You should independently evaluate each financial product and consider the suitability of such a financial product, by taking into account your specific investment objectives, financial situation, or particular needs, and by consulting an independent financial adviser as needed, before dealing in any financial products mentioned in this document.This information may not be published, circulated, reproduced, or distributed in whole or in part to any other person without the Company’s prior written consent.
Past performance is not always indicative of likely or future performance. Any views or opinions presented are solely those of the author and do not necessarily represent those of capex.com/zaJME Financial Services (Pty) Ltd trading as CAPEX.COM/ZA acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via CAPEX.COM/ZA, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15.  Magnasale Trading Ltd is the principal to the CFD purchased by investors.