It’s election day in the US

Harris and Trump are making their last pitch to American voters before the US Elections today. The uncertainty regarding the outcome is high given that the two candidates, Kamala Harris and Donald Trump are neck to neck in key-swing states with each candidate providing a very different vision for the US. At the same time, the stakes are also high given that nothing less than the future outlook of the strongest country in the world is in limbo. The outcome may prove to be messy as also all the seats of the US House of Parliament and a third of the seats of the US Senate are to be contested. Regardless of the outcome, the US election results are expected to be a big market mover. Additionally, if either of the presidential candidates contests the initial results, volatility may be extended. We may see different market reactions depending on the outcome of the elections. The markets had initially priced in the possibility that Trump would be elected and the so-called “Trump trade” gained traction, yet in the past few days there seems to be an unwinding of such positions. Yet should Trump get elected and at the same time the Republicans are in control of the US Congress we expect a strengthening of the USD, as expectations for a US isolationist economic policy with tariffs being imposed on imports from other countries, may intensify. US stock markets may also get some support in such a scenario as Trump as president with control over Congress could further deregulate markets and at the same time another cut in the corporate tax rate could be expected. Yet on the flip side should the results be contested, thus prolonging the uncertainty, we may see US stock markets losing ground and gold’s price gaining safe-haven inflows. In our view, we would not be at all surprised to see the election results being contested from either side, thus effectively prolonging the entire process. Moreover, in the event that the outcome is decided by one singular state such as Pennsylvania, the margin of victory (no. votes) will be crucial

The S&P500 appears to be moving in a sideways fashion, with markets eagerly awaiting the outcome of the US elections. We opt for a sideways bias and supporting our case is the break below our upwards-moving trendline which was incepted on the 8  of August, in addition to the RSI indicator which currently registers a figure of 44 implying a slight neutral towards bearish market sentiment. Nonetheless, for our sideways bias to continue we would require the index’s price to remain confined between the 5675 (S1) support level and the 5886 (R1) resistance line. However, due to the aforementioned fundamentals, the above picture could easily change by tonight and thus for a bullish outlook we would require a clear break above the 5886 (R1) resistance line with the next possible target for the bulls being the 6150 (R2) resistance level. On the flip side, for a bearish outlook we would require a clear break below the 5675 (S1) support level with the next possible target for the bears being the 5400 (S2) support line. The result of the US elections could easily sway the index one way or another.

XAU/USD appears to be moving in a sideways fashion. We opt for a sideways bias for the precious metal’s price despite the downwards moving trendline which was incepted on the 1  of November, in addition to the RSI indicator below our chart which currently registers a figure of 44 implying a neutral towards bearish market sentiment. For our bearish outlook to continue we would require a clear break below the 2720 (S1) support level, with the next possible target for the bears being the 2685 (S2) support line. On the flip side for a sideways bias we would require the precious metal to remain confined between the aforementioned S1 and R1 levels. Lastly for a bullish outlook we would require a clear break above the 2760 (R1) resistance line with the next possible target for the bulls being the 2790 (R2) resistance ceiling. Once again, on a fundamental level, we must highlight the US elections today which could lead to safe haven inflows, should the election results be disputed.

US500 Daily Chart

• Support:  5675 (S1), 5400 (S2), 5175 (S3)
• Resistance: 5886 (R1), 6150 (R2),  6385 (R3)

XAU/USD 4H Chart

• Support: 2720 (S1), 2685 (S2), 2640 (S3)
• Resistance: 2760 (R1),  2790 (R2),  2820 (R3)

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