Market Quick Take - October 2, 2020 Market Quick Take - October 2, 2020 Market Quick Take - October 2, 2020

Market Quick Take - October 2, 2020

John Hardy

Head of FX Strategy

Summary:  The US equity market tried to hold on to its recent gains despite the lack of progress on US stimulus talks, but the futures stumbled badly this morning on the news that US President Trump and his wife both tested positive for Covid-19 after traveling with an aide that later tested positive. The US dollar firmed slightly overnight and then further on the Trump news.

What is our trading focus?

  • S&P 500 Index (US500.I) & NASDAQ 100 Index (USNAS100.I) – US equities traded to new highs yesterday despite lack of progress on US stimulus (more on that below) and Trump’s quarantining, with local resistance above 11,500 taken out in the Nasdaq-100, leaving only the 11,750 area 61.8% Fibo as the last major resistance ahead of the all-time highs. Early morning here in Europe news has broken that Trump has also tested positive for Covid-19 immediately taking down US equity futures with the Nasdaq 100 futures breaking below yesterday’s open and back into the previous trading range.

  • STOXX 50 Index (EU50.I) – European equities are reacting to the news about US president Donald Trump has tested positive for Covid-19 but to the same degree as US equity futures. The first major key support level is at 3,136 and then 3,319. If these levels cannot hold today it opens for further declines in the short-term. We expect high beta sectors such as financials and consumer discretionary to lead the decline on the open.

  • Long volatility (VOOL:xetr) - with the muted response in gold and US Treasuries it is getting obvious that long volatility component will begin to play a crucial part of controlling risk in portfolio and asset allocation strategies. VIX futures are touching 34 this morning up more than 3 points suggesting a big move in long volatility structures such as Long short-term VIX futures.

  • EURUSD and AUDUSD - the US dollar was taken all the way to the brink of important local support before finding its legs again. With the rally overnight away from this support on US stimulus doubts and now Trump’s positive Covid-19 test, the final local support line is now somewhat clearer in EURUSD in yesterday’s 1.1765+ high and likewise, the 0.7200+ high in AUDUSD yesterday. Ahead of the weekend, the US dollar is likely to trade very reflexively with negative correlation to risk sentiment.

  • EURGBP and GBPUSD – severe back and forth in sterling pairs yesterday as headlines touted the lack of sufficient progress in Brexit talks to achieve what some call the “landing zone” or the “tunnel”, which basically means that there is a strong enough agreement in principle for to the two sides to hunker down and hammer out the details of a post-Brexit transition deal over the coming weeks. The headline risk is extreme and traders are advised to consider limited-risk options strategies (long puts and calls or put- or call- spreads) to express a view over the next two weeks to 1-month (the horizon over which it could become clear that a deal is a go or a no-go and/or beyond the December 31 end date of the transition period.

  • Spot Gold (XAUUSD) and Spot Silver (XAGUSD) - overnight weakness in both metals on U.S. stimulus impasse turned to strength following the White House announcement that Trump and FLOTUS had both tested positive. Gold has now despite the stronger dollar returned above $1900 with its relative strength most visible against other currencies. The market will be trading nervous today as we have seen the virus can have many faces, from a Boris Johnson critical one to others who sailed through relatively unharmed. Overall, however this is not an event that leads to gold selling. Next up, monthly US job report and the U.S. stimulus impasse.

  • WTI Crude Oil (OILUSNOV20) & Brent Crude Oil (OILUKNOV20) - extended yesterday’s losses on the Trump news and after chances of a U.S. fiscal stimulus package before the election faded. Overall the market has held up well during the past couple of weeks while the short-term fundamental outlook has weakened with the global energy demand recovery stalling amid rising Covid-19 cases around the world. Having failed to challenge resistance above $42.60/b, Brent crude is once again testing support at $39.50/b with the next level being $37/b.

What is going on?

  • US President Trump and First Lady Melania Trump tested positive for Covid-19. The news broke overnight that Trump aide Hope Hicks test positive after she traveled with Trump aboard Air Force One on Tuesday and Wednesday to election rallies before feeling ill and self-quarantining on the plane on the return flight. The positive test result was announced by Trump himself this morning in early European hours.

  • US House Democrats pass their $2.2 trillion stimulus plan with no Republican support - even as House Speaker Pelosi said negotiations with the White House would continue. Key points of contention include aide for local and state governments, with the White House not wanting to support what it sees as mismanaged Democratic strongholds. Time is running out for a deal with just over a month to the November 3rd election and Congress in recess soon to make room for election campaigning.

  • US data was a mixed bag – with the weekly initial jobless claims still at a very elevated 837k, although this was slightly better than expected and the lowest weekly tally since the crisis began for the US economy. Better news was the weekly continuing claims data, which dropped by 1 million from its upwardly revised number and now stands below 12 million. The Sep. ISM Manufacturing number, meanwhile surprised slightly to the downside with a reading of 55.4 vs. 56.5 expected and 56.0 in Augusts. The employment sub-component was still below 50, even if the 49.2 reading was the highest in over a year.

  • Eurocoin GDP growth indicator rose in September first positive change since February’s reading suggesting that Europe’s economy is turning around. Even more positively it happens at a time with a resurgence in Covid-19 cases. If economic activity continues to improve the next couple of months, then this could turn into that positive narrative that Europe has lacked.

  • New York City and State rating downgraded by Moody’s. The rating agency has downgraded bond rating for NY city and state to Aa2 from Aa1. The average 10 year spread of its debt versus a AAA rated state debt widened 55bps since the beginning of the year, making it more expenses for the state and municipality to raise capital.

What we are watching next?

  • Progress on Trump’s Covid-19 recovery – markets will be tiptoeing on news about Trump’s recovery with potential downward moves linked to adverse developments such as those that happened to the UK PM Boris Johnson when he fell ill with Covid-19.

  • Ant Group IPO – one the biggest IPOs in history is still pending with expected offering size at this point of $6.94bn. There is still no announced pricing date, but we expect it to be imminent.

Economic Calendar Highlights for today (times GMT)

  • 0800 – Norway Sep. Unemployment Rate
  • 0900 – Eurozone Sep. (P) CPI
  • 1230 – US Sep. Nonfarm Payrolls & Hourly Earnings
  • 1230 – US Sep. Unemployment Rate
  • 1400 – US Aug. Factory Orders
  • 1400 – US Final Sep. University of Michigan Sentiment

Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:

Apple Sportify Soundcloud Stitcher

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (
- Full disclaimer (

Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.