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Dow Jones Eyes Higher Highs on Tight Election Race, ASX 200 May Rise

Dow Jones Eyes Higher Highs on Tight Election Race, ASX 200 May Rise

Margaret Yang, CFA, Strategist

US ELECTION, DOW JONES, ASX 200 OUTLOOK:

  • US stocks extended gains as the election results tilted towards a Biden-win, divided Congress
  • Dow, S&P 500 and Nasdaq rose 1.95%, 1.95% and 2.59% respectively, gold jumped as USD fell
  • ASX 200 index may rise alongside Asia-Pacific stocks, eyeing 6,200 for key resistance
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US Election, Dow Jones and Asia-Pacific markets:

All three major US indices soared on Thursday despite a record daily coronavirus cases registered on 4th Nov. The Election odds appeared increasingly biased towards Joe Biden after he took several swing states. Biden seems to be on the course to pocket 264 out of the 270 electoral votes that are required to declare a victory, versus Donald Trump’s 214 votes. The 6 electoral votes from Nevada might be critical to give the final call. Biden is leading in Nevada with a slight advantage – 49.4% vs. 48.5% - at the moment of writing. Tight races in Pennsylvania and Georgia are also being scrutinized.

The haven-linked US Dollar fell to its lowest level in two months as demand for safety faded. A weaker US Dollar has underpinned precious metal prices, with gold soaring 2.3% to US$ 1,945. Crude oil prices, however, failed to register a big gain last night as demand side remained a key weighing factor on energy prices.

During the FOMC meeting last night, the Fed decided to keep the short-term borrowing rates unchanged at 0%-0.25%, saying that economic activities remains “well below” pre-pandemic levels. No further monetary stimulus were announced in the meeting, but the central bank remained open to fresh easing and re-emphasized the need for more fiscal support. Today’s US non-farm payrolls and unemployment rate are among the key data to watch. Find out more on our economic calendar.

US Non-Farm Payrolls – 12 Months

Dow Jones Eyes Higher Highs on Tight Election Race, ASX 200 May Rise

Source: Bloomberg, DailyFX

The US has registered 107,872 new coronavirus cases on November 4th, marking a record high. After the election, market focus will likely shift back to the fundamental elements and how the government plans to handle another pandemic wave.

New Covid-19 Cases in the US (Daily)

Dow Jones Eyes Higher Highs on Tight Election Race, ASX 200 May Rise

Source: Google

Sector-wise, all 9 Dow sectors closed in the green, with 90% of the index’s constituents ending higher. Materials (+5.43%), industrials (+3.21%) and financials (+2.90%) were outperforming, whereas healthcare (+0.21%) and energy (+0.52%) were lagging behind.

Dow Jones Index Sector Performance 05-11-2020

Dow Jones Eyes Higher Highs on Tight Election Race, ASX 200 May Rise

Source: Bloomberg, DailyFX

Technically, the Dow Jones index had a decent rebound this week and has broken above the 20-, 50- and 100-Day Simple Moving Average (SMA) lines with strong upward momentum. It may challenge a key resistance level at 12,200, where it failed to break in early September and mid-October. The MACD indicator has likely formed a “Golden Cross”, suggesting that short-term momentum may have turned bullish.

Dow Jones IndexDaily Chart

Dow Jones Eyes Higher Highs on Tight Election Race, ASX 200 May Rise

ASX 200 Index Outlook:

Australia’s ASX 200 index may rise alongside broader Asia-Pacific markets following strong US leads. Technically, the ASX 200 index arrived at a key resistance level at 6,200, which it failed to break through several times in the past four months. A successful breakthrough may open the room for more upside potential with an eye on 6,300. Another failure attempt may result in a pullback with an eye on 6,100 support – the 20-Day SMA line.

ASX 200 Index Daily Chart

Dow Jones Eyes Higher Highs on Tight Election Race, ASX 200 May Rise

--- Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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