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The week started on a cautious note in Europe and the US as today’s US presidential election looks very close to call and could eventually result in a tight – and even a contested outcome. As such, the major risk today is not a Harris or a Trump win, but it’s the reality that a Harris win could be heavily contested by Mr, Trump and lead to violence and chaos, and more uncertainty than necessary and hit sentiment.

But apart from that, the fact that Trump and Harris have different economic and political agendas, different priorities and the fact that there are sectors that could see a better lift under one or the other presidency may not change the overall performance of the long-term stock market, and not even the concerned sectors...

Did you know that clean energy outperformed traditional energies by 43% under Trump’s presidency? And, wait, traditional energies outpaced clean energies by 53% per year under the Biden presidency.

And zooming out, a quick glance to the S&P500’s performance a year following a US election has always been positive since 1984, no matter if the US was led by a Republican or a Democrat, except in 2000’s tech bubble.

Nvidia in, Intel out, Apple sold

Yesterday saw Nvidia briefly dethrone Apple as the world’s most valuable company, as the world’s AI darling rose on celebration of its inclusion into the Dow Jones index effective from Nov 8th – as a replacement to Intel that was sitting there for the past 25 years. The switch was clearly perceived as AI’s progress within the tech industry, and its increasingly dominant position. As per Apple, the news that Warren Buffet’s Berkshire Hathaway reduces its holding by another 25% didn’t help boost appetite. But hey, Apple remains the firm’s biggest holding, still, as Buffet’s team prefers to sit on a colossal amount of cash – apparently put off by high market valuations of the moment.

Speaking of valuations, the S&P500 kicked off the week on a slightly negative note, as I said, but near an ATH level, as it is the case for Nasdaq 100 and Dow Jones. The US yields, on the other hand, fell and the dollar was hit by a wave of realism that the gap between Harris and Trump was much tighter than what the prediction and broader markets had been pricing in over the past few weeks. The latter gives an idea about the type of a relief rally that we could see in case Harris wins and Trump accepts.

As such, the EURUSD – which is seen as one of the most vulnerable major currencies to a potential Trump victory due to a tariff threat on the EU – is consolidating a touch above the 1.09 level. A Harris win could send the pair above the 1.10 psychological mark, but a Trump win or a contested outcome could move capital to the US dollar.

And in case of a chaotic election day and a contested outcome, gold and Swiss franc would be my go-to places to let the dust settle.

Australia and China

The Reserve Bank of Australia (RBA) maintained its policy rate unchanged at a 13-year high, citing that headline inflation has declined but that the underlying inflation – near 3.5% - remains too high to make a decision to cut the rates. The AUDUSD rebounded on the back of the divergent Federal Reserve (Fed) and RBA policy outlook. The Aussie probably got a boost from some good news from China as well – its biggest trading partner – as the Caixin’s PMI index showed a stronger-than-expected rebound in activity in October, also supported by a rebound in factory output. To top it all off, news that China is now considering a plan to lift the local governments’ debt ceiling and to shift some of their hidden debt onto their formal, official financial statements to reduce financial burden of the local governments and give more transparency to the picture, also helped. The CSI 300 is up by more than 2% this morning and copper futures are gaining momentum to the upside.

Is this time the charm? Maybe, but enthusiasm over China was not enough to further boost oil prices this morning. The barrel of US crude is slightly lower at the time of writing, near $71.50 level, after having jumped more than 3% on Monday, on news that OPEC is considering to delay their output increase by a month – or more. Rumours that the tensions between Iran and Israel could rise again should also provide some support to the short-term tactical bulls above the 50-DMA, near $71.30, and above the critical $70pb level, but oil bulls need a robust Chinese recovery, and perhaps a longer restriction output from OPEC to win over the medium-term bears. The key resistance to the actual bearish trend, supported by Chinese weakness and ample global supply, stands at $72.85pb, the major 38.2% Fibonacci retracement to the July – September selloff.

Daily Pivots: (S1) 1.0860; (P) 1.0887; (R1) 1.0905; More...

EUR/USD's rebound from 1.0760 short term bottoming might still extend higher. But strong resistance should be seen from 55 D EMA (now at 1.0937) to limit upside. On the downside, below 1.0831 minor support will bring retest of 1.0760 first, and then 61.8% retracement of 1.0447 to 1.1213 at 1.0740.

In the bigger picture, price actions from 1.1274 (2023 high) are seen as a consolidation pattern to up trend from 0.9534 (2022 low), with fall from 1.1213 as the third leg. Downside should be contained by 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404, to bring up trend resumption at a later stage.

Daily Pivots: (S1) 151.59; (P) 152.08; (R1) 152.62; More...

Intraday bias in USD/JPY remains neutral as range trading continues. Another rise is expected with 151.44 support intact. Sustained trading above of 61.8% retracement of 161.94 to 139.57 at 153.39 will pave the way to retest 161.94 high. However, considering bearish divergence condition in 4H MACD, firm break of 151.44 will indicate short term topping, and turn bias back to the downside for 55 D EMA (now at 149.08).

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 1.2928; (P) 1.2964; (R1) 1.2992; More...

Intraday bias in GBP/USD remains neutral as range trading continues above 1.2842. Further decline is expected as long as 1.3042 resistance holds. Below 1.2842 will resume the fall from 1.3433 to 61.8% retracement of 1.2298 to 1.3433 at 1.2732. However, considering bullish convergence condition in 4H MACD, firm break of 1.3042 will indicate short term bottoming, and turn bias back to the upside.

In the bigger picture, considering mildly bearish divergence condition in D MACD, a medium term top is likely in place at 1.3433 already. Price actions from there are seen as correction to whole up trend from 1.0351 (2022 low). Deeper decline would be seen to 38.2% retracement of 1.0351 to 1.3433 at 1.2256, which is close to 1.2298 structural support. Strong support should be seen there to bring rebound.

Daily Pivots: (S1) 0.8610; (P) 0.8646; (R1) 0.8676; More…

Intraday bias in USD/CHF remains mildly on the downside for the moment. Fall from 0.8710 short term top would target 55 D EMA (now at 0.8614). Sustained break there will argue that the rebound form 0.8374 has completed, and bring deeper fall back to this low. On the upside, firm break of 0.8710 will resume the rebound from 0.8374 instead.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with fall from 0.9223 as the second leg. Strong support could be seen from 0.8332 to bring rebound. Yet, overall outlook will continue to stay bearish as long as 0.9243 resistance holds. Firm break of 0.8332, however, will resume larger down trend from 1.0146 (2022 high).

Daily Pivots: (S1) 1.3876; (P) 1.3902; (R1) 1.3929; More...

Intraday bias in USD/CAD stays neutral for the moment. Considering bearish divergence condition in 4H MACD, firm break of 1.3890 minor support will indicate short term topping, and turn bias back to the downside for 55 D EMA (now at 1.3725). On the upside, decisive break of 1.3976 will resume larger up trend.

In the bigger picture, sideway consolidation pattern from 1.3976 (2022 high) might still extend further. While another decline cannot be ruled out, strong support should emerge above 1.2947 resistance turned support to bring rebound. Rise from 1.2005 (2021 low) is still in favor to resume at a later stage. Decisive break of 1.3976 will target 61.8% projection of 1.2401 to 1.3976 from 1.3418 at 1.4391.

In focus this week

Today, the US election takes place and is the major highlight of the week. Over the weekend, Harris' odds in prediction markets have risen sharply, but swing state polls continue to signal a very close race. Michigan, Wisconsin and Pennsylvania are the most likely tipping points of the election.

Tomorrow morning, when we - hopefully - know the results of the US election, we will be hosting two conference calls where we present our instant views on the results and implications for markets and the economy: Conference call on the implications of the US election for Global and Scandi markets at 8:40 - 9:10 CET and US elections morning call - Macro need-to-knows at 9:15 - 9:30 CET.

Economic and market news

What happened overnight

In Australia, the Reserve Bank of Australia opted to maintain steady interest rates at 4.35% (cons: 4.35%, prior: 4.35%), aligning with both analyst consensus and market expectations. This decision comes as underlying inflation continues to be too high.

What happened yesterday

In the US, investors reined in bets on a win for Donald Trump causing EUR/USD to rise by 0.4%. This comes as a poll by J Ann Selzer released this weekend showed support for Kamala Harris in Iowa.

In the euro area, the Sentix investor confidence indicator came in below market expectations at -12.8 (cons: -12.5), providing a negative first assessment of sentiment in November. On the upside, manufacturing PMI data for October surprised slightly to the upside at 46.0 (cons: 45.9, prior: 45.9). Overall manufacturing continues to stagnate, despite diminishing headwinds from falling interest rates.

In Oil markets, prices continued to gain following OPEC+ announcing Sunday a delay in December output increases until January next year. Brent futures increased by 2.90% to USD 75.22 per barrel and WTI crude climbed 3.02% to USD 71.48.

Equities: Global equities were flat yesterday. Only minor movements across sectors and styles, which is understandable given the US presidential election today. Bond markets will play a crucial role for equities after the election, but we can end up in a situation where the removal of uncertainty will have the biggest impact. The VIX index closed at 22 yesterday. Without the election, we argue it should have been closer to 15, considering the current phase of the business cycle and the recent macroeconomic and earnings data. In the US yesterday, Dow -0.6%, S&P 500 -0.3%, Nasdaq -0.3%, and Russell 2000 +0.4%. Chinese markets are boosting Asia this morning, following a strong Caixin service PMI and further announcements from the central government about potential fiscal support. US futures are marginally higher this morning, while European futures are marginally lower.

FI: The rising probability of a Harris presidential win sent US yields 10bp lower in the longer end of the curve on reduced probability of a republican sweep, and thus less fiscal easing. Like much of the move on late Friday, this move was largely a UST move and markets did not record a beta to EUR rates. In fact, euro rates traded mostly sideways with no appetite among investors to add risk to existing positions.

FX: The FX market is in consolidation mode ahead of today's US election. After a slight pull-back to the Trump trades at the onset of the week, broad USD is modestly stronger overnight. EUR/USD is at the high end of the 1.08-1.09 range, USD/JPY back above 152 and cable just shy of 1.30. RBA left its policy rate unchanged at 4.35% this morning, which was as expected. The AUD barely budged. At 11.66, EUR/SEK has one eye on the US election and one on the Riksbank rate decision, with two-sided risks depending on the outcomes. As for EUR/NOK, just below 12.00, the topside is vulnerable to a Trump win.

Daily Pivots: (S1) 0.6571; (P) 0.6595; (R1) 0.6611; More...

AUD/USD is staying in consolidation above 0.6536 and intraday bias remains neutral. Stronger recovery might be seen, but outlook stays bearish as long as 55 D EMA (now at 0.6688) holds. On the downside, sustained break of 0.61.8% retracement of 0.6269 to 0.6941 at 0.6526 will target 0.6348 support next.

In the bigger picture, rise from 0.6269 (2023 low) should have completed with three waves up to 0.6941. Corrective pattern from 0.6169 (2022 low) is now extending with another falling leg. Deeper decline would be seen back to 0.6269 as sideway trading extends.

Australian Dollar remained stable after RBA decided to keep the cash rate unchanged at 4.35% as widely expected. In the post-meeting press conference, Governor Michelle Bullock acknowledged that there has been "good progress" in reducing inflation. However, the central bank did not adopt a more dovish stance, which came as a surprise to some market participants anticipating signals of policy easing in the near term. RBA maintained its position of "not ruling anything in or out," indicating flexibility but no immediate plans for rate cuts.

The slight downgrade in inflation forecasts was not sufficient to warrant a rate cut son. Consequently, some analysts are now suggesting that, without significant changes in RBA's statement, the timing of the first rate cut may be pushed beyond February. Unless there is a substantial decline in underlying inflation in the fourth-quarter CPI report, RBA might wait for first-quarter data before taking action. This scenario would make May a more realistic timeframe for initiating a policy easing cycle.

Elsewhere in the currency markets, overall activity remains low as traders await the results of the US presidential election. Dollar continues to sit at the bottom of the performance chart for the week so far, followed by Sterling and Yen. Swiss Franc is leading as the strongest currency, followed by Aussie and then Loonie. Kiwi and Euro are positioned in the middle. Despite these movements, all major currency pairs and crosses are sitting within last week's ranges, reflecting market indecision.

From a technical standpoint, while focus is primarily on Dollar pairs, EUR/CAD is also worth some attention after last week's strong bounce. Consolidation pattern from 1.5225 might have completed at 1.4885 already. Firm break of 1.5225 will confirm larger up trend resumption for 61.8% projection of 1.4592 to 1.5225 from 1.4885 at 1.5276, and then 100% projection at 1.5518.

In Asia, Nikkei rose 1.45%. Hong Kong HSI is up 1.28%. China Shanghai SSE is up 1.72%. Singapore Strait Times is up 0.11%. Japan 10-year yield is down -0.0097 at 0.936. Overnight, DOW fell -0.61%. S&P 500 fell -0.28%. NASDAQ fell -0.33%. 10-year yield fell -0.052 to 4.309.

RBA stands pat, still not ruling anything in or out

RBA maintained its cash rate at 4.35% today, as expected, while underscoring that inflation risks remain a concern. In its statement, RBA noted that although headline inflation has declined and is projected to stay lower in the short term, it considers underlying inflation as "more indicative" of inflation trends, and this measure remains "too high."

In line with this cautious approach, the emphasized the need to remain “vigilant to upside risks to inflation,” signaling flexibility by reiterating that it is "not ruling anything in or out." The ’s latest economic projections offer a more tempered outlook, with slight downward adjustments to growth and inflation forecasts, pointing to persistent caution amid moderated expectations.

Key revisions in the RBA’s projections include:

• Year-average GDP growth: 2024 unchanged at 1.2%, but lowered for 2025 from 2.5% to 2.2% and for 2026 from 2.4% to 2.3%.
• Year-ended CPI: Forecast for December 2024 is revised down from 3.0% to 2.6%, with December 2025 held steady at 3.7%, and December 2026 slightly reduced from 2.6% to 2.5%.
• Trimmed mean inflation: Forecast for December 2024 lowered from 3.5% to 3.4%, with additional downgrade for December 2025 from 2.9% to 2.8%, and December 2026 from 2.6% to 2.5%.

These adjustments reflect an outlook of moderated economic growth and slightly eased inflation pressures. However, RBA’s flexible stance indicates it is prepared to act if inflation risks become more pronounced, balancing economic stability with its inflation objectives.

China's Caixin PMI composite rises to 51.9, policy impact begins to show

China's Caixin Services PMI rose to 52.0 in October, surpassing expectations of 50.5 and marking the highest rate of growth in three months. The services sector continues its expansionary streak that began in January 2023. PMI Composite also increased from 50.3 to 51.9, its highest level in four months, maintaining expansion for the 12th consecutive month, driven largely by service-sector resilience.

Wang Zhe, Senior Economist at Caixin Insight Group noted that challenges noted that a range of supportive policies has since been introduced by the Politburo since September. The recent Caixin PMI readings for both manufacturing and services suggest that “market demand stabilized and optimism improved,” signaling early effects of the new policies.

Looking ahead

Swiss unemployment rate, France industrial poroduction and UK PI services final will be released in the European session. Later in the day, Canada will release trade balance. US will release trade balance and ISM services.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6571; (P) 0.6595; (R1) 0.6611; More...

AUD/USD is staying in consolidation above 0.6536 and intraday bias remains neutral. Stronger recovery might be seen, but outlook stays bearish as long as 55 D EMA (now at 0.6688) holds. On the downside, sustained break of 0.61.8% retracement of 0.6269 to 0.6941 at 0.6526 will target 0.6348 support next.

In the bigger picture, rise from 0.6269 (2023 low) should have completed with three waves up to 0.6941. Corrective pattern from 0.6169 (2022 low) is now extending with another falling leg. Deeper decline would be seen back to 0.6269 as sideway trading extends.

Short Term Elliott Wave View on Dollar Index (DXY) suggests that rally to 104.63 ended wave ((4)). This completed cycle from 9.27.2024 low and the Index should either resume lower in wave ((5)) or pullback in 3 waves at least. The Index has started to turn lower and we are calling the move lower from wave ((4)) high as a diagonal 5 waves. Down from wave ((4)), wave (i) ended at 103.98 and wave (ii) ended at 104.43. Wave (iii) lower ended at 103.82, wave (iv) ended at 104.19, and wave (v) lower ended at 103.68. This completed wave ((i)) in higher degree. Rally in wave ((ii)) ended at 104.35.

Index resumed lower in wave ((iii)) towards 103.63 and wave ((iv)) ended at 103.83. Final leg wave ((v)) ended at 103.57 which completed wave 1 in higher degree. Wave 2 rally is in progress with internal subdivision as a zigzag Elliott Wave structure. Up from wave 1, wave ((a)) is expected to end soon, then it should pullback in wave ((b)), before the Index rallies higher again in wave ((c)). This will complete wave 2 in higher degree before the Index resumes lower. As far as pivot at 104.63 high stays intact, expect rally to fail in 3, 7, or 11 swing for further downside.

Dollar Index (DXY) 60 Minutes Elliott Wave Chart

DXY Elliott Wave Video

https://www.youtube.com/watch?v=W8QDucEPLKs