KVB Market Analysis | 5 Nov: XAU/USD Holds Near Support as Election Concerns Fuel Safe-Haven Demand

Product: XAU/USD

Prediction: Decrease

Fundamental Analysis:

Gold prices are hovering near a one-week low set on Monday, but the decline appears limited due to safe-haven demand linked to uncertainty around the U.S. election and potential Iranian retaliation against Israel.

Investor sentiment was weak on Monday, with XAU/USD trading around Fridays close of $2,736 per ounce, as many favoured higher-yielding assets. The upcoming U.S. presidential election is influencing market behaviour, with participants assessing whether the Federal Reserve can continue easing policies or will need to address rising inflation. Polls are set for Tuesday, with initial results expected early Wednesday.

Stock markets were mixed, with the Nikkei 225 down sharply while other Asian indices gained. In Wall Street, major indexes fell after a mixed start, as investors sought safety. This week also includes key monetary policy announcements from central banks, with the Reserve Bank of Australia on Tuesday and the Bank of England and Federal Reserve on Thursday. As the U.S. session unfolds, the Dollar is strengthening amid increasing risk aversion, but XAU/USD remains within a range.

Technical Analysis:

The daily chart for the XAU/USD pair indicates a decline in bullish momentum, but the overall outlook remains positive. The pair is trading above bullish moving averages, with the 20 Simple Moving Average providing support around $2,705.00. The 100 and 200 SMAs are also rising below, showing buyer strength. Although technical indicators have dipped slightly, they remain above their midlines, suggesting limited bearish potential.

In the short term, the 4-hour chart shows sellers gaining control. Technical indicators are firmly negative, and the 20 SMA is trending downward. If XAU/USD breaks below the immediate support at $2,730, further declines may occur.

Product: GBP/USD

Prediction: Decrease

Fundamental Analysis:

The GBP/USD pair is trading steady near 1.2950 during early Asian trading on Tuesday. Traders are focusing on the outcome of the U.S. presidential election, with attention shifting later in the week to monetary policy decisions from the Bank of England and the U.S. Federal Reserve.

After ending five weeks in the red, GBP/USD opened with a bullish gap and moved toward 1.3000 early Monday. A general decline in the U.S. Dollar helped fuel this rise, as uncertainty around the election weighs on the USD. Betting site PredictIt gives a 51% chance of a Kamala Harris victory, marking her first lead over Donald Trump since October 9.

U.S. stock index futures are mixed, reflecting a cautious market. Investors may hold off on big trades until the election outcome is clear. If U.S. stocks sell off after the market opens, GBP/USD might struggle to rise further.

Technical Analysis:

The Relative Strength Index on the 4-hour chart is slightly above 50, but GBP/USD is having trouble staying above 1.2980, which is where the 100-day Simple Moving Average is positioned, indicating hesitation from buyers.

If 1.2980 remains a resistance level, the next support may be at 1.2940, followed by 1.2900. If GBP/USD can stabilize above 1.2980, it may face resistance at 1.3000 before reaching 1.3040.

Product: USD/JPY

Prediction: Increase

Fundamental Analysis:

USD/JPY is trading lower, staying below 152.00 during Asian trading on Monday as the U.S. Dollar experiences significant selling pressure. This is largely due to rising expectations that Kamala Harris will win the presidential election, which could lead to continued policies that are seen as negative for the Dollar.

The Japanese Yen has given back some recent gains after the Jibun Bank and S&P Global released the Manufacturing Purchasing Managers Index on Friday. The PMI fell to 49.2 in October from 49.7 in September, indicating a decline in manufacturing output.

Technical Analysis:

The USD/JPY pair is trading around 152.30. Daily chart analysis shows a potential weakening of the bullish trend, as the pair has fallen below its upward channel. However, the 14-day Relative Strength Index remains above 50, indicating that bullish momentum is still present.

Resistance is seen at the lower boundary of the ascending channel at 152.50. If the pair manages to re-enter this channel, it could aim for the upper boundary near 158.30.

On the downside, support may be found at the 14-day Exponential Moving Average around 151.50, with additional support at the psychological level of 150.00.