Contest Trader

Don't miss the chance to cash-in prizes totaling

$10.000
Register here for the Ultimate demo trading competition

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

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

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.

This information/research prepared by Miguel Ruiz (“the research analyst”) does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.

The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).

The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest.

The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.