Market volatility enhanced after Democrats’ triumph

Oil tumbles as hopes for diplomacy in the Middle East rise

In maybe the most influential market movement yesterday, oil prices tumbled. The blue wave in the US midterm elections enhanced market hopes for a possible diplomatic solution in the US-Iran conflict or at least eased worries for a full US assault. It’s characteristic that US President Trump admitted that Republicans lost at least “in part” because of Iran. US Congress exercises little influence over US foreign policy, but should see the US President pivoting towards diplomacy, we may see oil prices slipping further and vice versa.

USD remains weak in the FX market

The USD remained weak yesterday, given the midterm election results, despite the ADP figure dropping less than expected, yet we consider the US employment data for October tomorrow, as the next big test for the USD. In the UK, BoE is about to hike rates as mentioned in yesterday’s report, while in Japan, the BoJ’s September meeting minutes verified the bank’s hawkish intentions. 

US stocks rally on US midterm election results

US stock markets rallied yesterday as a byproduct of the Democrats’ win in the midterm elections, as it tended to ease market worries for inflation, given the drop of oil prices. The markets seem to be pricing in that US President Trump will now be less able to pursue an aggressive foreign policy both on the war against Iran and his tariff policies, improving the market sentiment. 

Gold’s price continues to rise

Gold’s price continued to rise in today’s Asian session, in the aftermath of the US midterm elections. The drop in oil prices and the slide of the USD, along with US bond yields, the weakening of the market’s expectations for the Fed to hike rates in the December meeting, all assisted gold’s price to rise on a fundamental level. We continue to see fundamentals as supporting gold’s price and expect further gains.

Other highlights for today

In today’s American session, we get the US weekly initial jobless claims figure and at the same time we also note the release from the Czech Republic of CNB’s interest rate decision, which is expected to hike rates. On a monetary level we note that the Fed’s Hammack and Barkin speak, while BoC Governor Macklem appears before Canadian lawmakers. In tomorrow’s Asian session, we get Japan’s labour earnings data and in the European session Germany’s industrial output and Euro Zone’s retail sales all for September.

Charts to keep an eye out

Dow Jones rallied yesterday, and during today’s Asian session broke the 53500 (S1) resistance line now turned to support. As the downward motion of the index has been interrupted and the RSI indicator managed to rise above the reading of 50, we adopt a bullish outlook for the index. Yet the index’s price action has reached the upper Bollinger band, which may slow down the bulls. Should the bulls maintain control over Dow Jones, we may see it aiming if not breaking the 54730 (R1) resistance line. Should the bears take charge we may see the index’s price action, breaking the 53500 (S1) line and start aiming if not reaching the 52685 (S2) level.     

WTI’s price tumbled almost 10% yesterday, breaking the 87.55 (R1) support line, now turned to resistance. In its downward motion the commodity’s price broke the upward trendline guiding it since the 2^nd of July, signalling an interruption of the upward motion. Also the RSI indicator has dropped nearing the reading of 30, implying an enhancing bearish market sentiment, hence we adopt a bearish outlook for WTI. Yet its price action has breached the lower Bollinger band which may slow down the bears. Should the bears maintain control over WTI’s price, we may see it aiming if not breaking the 82.00 (S1) line. Should the bulls take over, WTI may break the 87.55 (R1) line and start aiming for the 94.30 (R2) level.  

Calendar follows

US 30 Cash daily chart

• Support: 53500 (S1), 52685 (S2), 51700 (S3).
• Resistance: 54730 (R1), 55750 (R2), 57000 (R3).

WTI daily chart

• Support: 82.00 (S1), 76.60 (S2), 71.85 (S3).
• Resistance: 87.55 (R1), 94.30 (R2), 101.00 (R3).