In this week’s Market Outlook we take a look at the key charts ahead of the election with #GOLD, #EURUSD , #OIL and more!
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Hi guys, and welcome to this Blueberry Markets video update with me, John Kibbler, head currency analyst.
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In this market outlook this week, we’re going to be focusing on the election. I’ve picked three charts out which I think could be directly affected obviously by the elections, and we’re going to go over those three charts. Then in the week, we’ll do a bit more build upon what we could anticipate or what we’re seeing happening in the markets. Maybe where we can look to place some potential orders in preparation for the election or at least look elsewhere for the opportunities.
Now, I do have the strength and weakness table up here. Just to kind of show you that probably the Dollar has gained some strength this week. Obviously, anything could happen to go into this week. The election resulted in high volatility, and we also saw some big swing moves.
Now I am still anticipating Dollar strength and what I want to do is just look at sort of the similarities between the now and the previous election. So just looking at EUR/USD. For instance, the price is almost starting to make its way down.
We’ve got that Dollar strength in play, and looking at this from a technical perspective, I’d be expecting the price to head towards this 1.14 area. Now we know as well seasonally the Dollar typically does strengthen through an election year, and you know that’s what I’m also expecting a seasonal drop to EUR/USD.
If we go back to the previous time we saw the election, there’s a little bit of a similarity. Not in terms of where the trend is but essentially, what’s happening right now. Because technically we’re in a different sort of scouring.
We’re in a bit more of an uptrend on price at the moment. Whereas here, we actually had a little bit of consolidation before seeing that that trend moved to the downside. But essentially, this candlestick here was the week of the election and what we saw was prior to that, the market was making lower lows and lower highs.
And we can see here very similar to what we have now, where we’ve just broken through into those fresh lows. The market pulls back, takes out the November highs, and drops to the downside.
So I’m expecting something very similar again, and I’m expecting the price to react very similarly to this with a drop down into that 1.14 area.
If I just try and squeeze it all on the screen. We can see here nice lower high in play, the price drops, where does it drop into this huge supporting level on Euro, which was almost like the bottom of this overall range that we were seeing through 2014-2015 and the end of 2016. We hit that huge level, and we break out, and the market rallies to the upside considerably.
I’m looking for a similar sort of thing to happen here again, okay. We’re looking for that price to drop to the downside quite significantly into a key area of support, like what happened down in here.
The key area support for us this time is that 1.14, then are we going to see that continuation of that Dollar weakness from there? Typically post-election year as well isn’t very good for the Dollar, so we could expect a pullback into this 1.14 and a move to the upside.
Another chart that I like is gold. Put a couple of just some notes on the screen here. Gold seasonally bullish in January, and price typically falls post-election. What I mean by that is immediately after the election typically the price of gold falls and if we go back to a similar situation again–we just zoom out and put the two charts into perspective here.
The market fell the last time we had the election. We had a similar sort of pattern again, where the market made a new lower low after coming from an area of an uptrend, hit an area, dropped to the downside. Then through January, through the new year, typically gold rallies, and that’s what we’ve seen pretty much ever since really from that election.
Gold prices have continued to soar. Even so lately, especially because this election held little bit more of a risk factor in terms of we have the pandemic. Lots of places seeing a second wave, lots of places re-entering lockdown.
The UK on Saturday just announced that they are going back into a lockdown situation. So, I’m expecting some downside to the UK stock market as well, which we’ll touch upon in this video.
But, essentially looking at this sort of price here on gold. It’s a matter of looking for those key areas where price could come back into, and I quite like this zone down in here, between sort of 1780 and 1680s-the zone that I quite like.
What I’m expecting from gold is a similar sort of drop okay with the price hitting this zone through here and then looking for those seasonals to come through where we see that move. Now. I did five of this sort of move just into those lows, but when looking back at the history of what typically happens in an election. We do tend to see a decent retracement of gold prices.
So, I’m actually looking for gold to drop a little bit lower than just these lows through here and press to the downside, okay.
Now, what we may see is if the pandemic continues to kind of climb, then gold prices may have quite a sharp effect on the upside. So we need to be a little bit –sorry to the downside– we need to be a little bit careful here.
Because the last time we were viewing the pandemic, we had this huge drop here, which could also add a bit of a driver to gold prices falling into this supporting zone. So nice little thing to watch there on gold, and oil prices as well.
Now, I did want to touch upon oil prices, and my thing was with oil was the fact that there were two different sides, and really Trump and Biden have completely different opinions on what they see with the energy sector.
For instance, Trump is a bit more for oil and is looking to invest in more fracking. Biden wants to rejoin the Paris agreement and invest in renewable energy.
Now the thing is, that would usually cause a little bit of a stir for us to say well, you know if Trump is still for oil, Trump wants to see lower prices, okay. He doesn’t want to see oil too high. You have to remember that.
So just because Trump is for oil doesn’t mean that the prices of oil are going to climb. If anything that will crack more supply for oil, and we could see the markets drop back into these lows. Because again, like I said, the pandemic is crushing oil prices.
This was the oil prices drop throughout this movement through here, through 2020, has already been significantly down. That’s due to the pandemic and what basically is happening here is there’s too much oil.
The supply of oil, there’s so much of it that they can’t push it out quick enough or they can’t get rid of it quickly enough, and they’ve got this huge, huge supply of oil which is causing less demand essentially because we’re in this lockdown state and we’re seeing oil prices fall.
If Trump is for oil and is investing in to oil, that necessarily means that there could be even further supply of oil, which then will cause prices to push lower, okay.
Biden, on the other hand, wants to invest in renewable energy. Now, if Biden wants to invest in renewables, this is where we could start to see oil prices rise, okay.
Now it might not be immediate because of the effects of the pandemic but, if that supply of oil starts to be squeezed then the less supply we’re going to see higher oil prices, because less supply, more demand.
We’re going to see those oil prices rise. I don’t think that will happen. I think, either way, at the current situation with oil, there is too much of it. Either way, I still feel we’ll see a drop in oil.
I can still see prices heading back towards these lows through here, and so, don’t go ahead and start buying oil just yet. But, we’ll think about if Biden does come into the presidency, and we see him invest into renewable energy as he says maybe further down the line, we can look at some areas to potentially buy oil.
But these three charts are going to be super interesting to watch. Expecting oil to drop further. Gold, we’re expecting a slight drop on before seeing a seasonal play through January.
Euro, expecting a drop into this 1.14 level. We’ll point out some key areas this week. We’ll try and keep you up to date as much as we can.
I will speak to you soon. I hope you have a great trading week and be safe in those markets. Very high volatility and we will keep you up to date as soon as. Thanks, guys.
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