Market sensitivity intensifies as presidential election looms

Uncertainty has enveloped the financial markets ahead of Tuesday’s U.S presidential election with global stocks destined for steeper losses as risk aversion encourages investors to scatter away from riskier assets.

Market sensitivity remains rife with Asian stocks bouncing into gains during early trading on Monday following reports from the FBI reinforcing its views that Hillary Clinton’s use of her private server email was not a crime.

Although Asian, European and American markets may edge higher today from the recent FBI reports, it may be too early to celebrate these gains as the ingredients for a bear trend still linger in the background.

It should be kept in mind that the S&P 500 experienced its longest losing streak since 1980 last week with the current technical bounce acting as a foundation for another heavy decline.

Global sentiment remains fragile and when factoring the awful combination of plummeting oil prices, concerns over slowing global growth and the persistent uncertainty, it could take an unexpected event to trigger a market-shaking selloff.

Dollar bulls maintain control

The Greenback edged lower on Friday following October’s goldilocks US employment report which fortified expectations over the Federal Reserve raising US interest rates in December. Employers in the States added 161,000 jobs last month while average hourly earnings rose to 2.8% (YoY) its biggest rise since June 2009. With US data repeatedly displaying signs of economic stability, sentiment remains firmly bullish towards the Dollar which should keep prices buoyed.

Tuesday’s pending presidential election could inject the Dollar with extreme levels of volatility as investor’s systematically offload and reload positions to be on the right side of the trade. The Dollar continues to be supportive of a Clinton victory with the latest reports from the FBI clearing Clinton of any criminality regarding the private email server propelling the Dollar higher.

From a technical standpoint, the Greenback is still firmly bullish on the daily timeframe with bulls-eying the 98.00 resistance. With the probability of a December rate hike currently standing around 70%, a breakout above 98.00 could open a path towards 99.00 and potentially higher.

Sterling still under pressure

Sterling displayed a remarkable rebound last week with the GBPUSD lurching towards four week highs at 1.255 as easing hard Brexit concerns rekindled investor attraction towards the currency. The ongoing battle of words between financial heavyweights on the hard Brexit scenario has placed the Sterling on a chaotic rollercoaster ride with price sensitivity intensifying by the day.

With last week’s high court ruling pronouncing that the Brexit cannot commence without the vote of Parliament, previous concerns over a potential hard Brexit led by Theresa May was slightly subdued consequently lifting the pound. Regardless of the short-term gains, sentiment remains firmly bearish towards the Sterling with further losses expected as uncertainty entices bears to attack.

Sterling/Dollar remains heavily pressured on the Daily timeframe with Dollars resurgence amid mounting US rate hike expectations capping upside gains. From a technical standpoint, a breakdown below 1.2350 could encourage a steeper decline towards 1.2200.

Gold turns volatile

Gold displayed extreme levels of volatility last week as the chaotic combination of Dollar strength and uncertainty ahead of Tuesday’s presidential election kept investors on edge. The zero yielding metal experienced a sharp decline on Monday with prices crashing towards $1285 after the FBI cleared Hillary Clinton of criminal charges relating to the private email server.

It is becoming increasing clear that financial markets are supportive of a Clinton victory with Gold poised for steeper declines if optimism intensifies over Hillary Clinton winning the presidential election. Prices are extremely sensitive as of writing with explosive swings expected if any fresh news related to the looming presidential election is released.

From a technical standpoint, a breakdown below the psychological $1285 level could open the gates towards $1270.