KVB Market Analysis | 1 Nov: Gold Struggles as Dollar Surges After Trump's Election Victory

Product: EUR/USD

Prediction: Decrease

Fundamental Analysis:

EUR/USD plummeted midweek, falling over 1.75% and dropping below 1.0750 for the first time since July. The market shifted towards the U.S. Dollar following clear results from the presidential election that positioned former President Donald Trump as the frontrunner.

On Wednesday, the pair faced significant selling pressure, retreating to new multi-month lows around 1.0685-1.0680, as traders assessed Trumps decisive victory and the potential for a “Red Sweep.” The pair also broke convincingly below the 200-day moving average at 1.0870, signalling possible further declines.

The U.S. Dollar surged past 105.00 on the Dollar Index, supported by rising U.S. yields and falling German bund yields. The Fed is expected to announce a 25-basis-point rate cut, while the ECB remains cautious after lowering its deposit rate. Trump's win could lead to tariffs on European and Chinese goods, raising inflation pressures and impacting the Fed's easing cycle. The U.S. economys strength relative to the eurozone suggests the Dollar may remain strong in the short term.

Technical Analysis:

Further losses could push EUR/USD down to the November low of 1.082, followed by the June low of 1.0666.

On the upside, November high of 1.0925 serves as the first resistance, followed by the 55-day SMA at 1.1000 and the 2024 peak of 1.1214.

Weakness is likely to continue as long as EUR/USD stays below the 200-day SMA at 1.0869.

The four-hour chart indicates renewed selling pressure, with initial support at 1.0682, followed by 1.0666 and 1.0649. The relative strength index has dropped to around 31.

Product: XAU/USD

Prediction: Decrease

Fundamental Analysis:

Gold prices ticked higher during the Asian session but lack strong bullish momentum, remaining close to a three-week low reached on Wednesday. Optimism about future economic growth under the new Trump presidency is supporting a positive market sentiment.

In a closely contested election, Donald Trump has been elected the 47th President of the United States, securing 277 electoral votes—more than the 270 needed to take office in January 2025.

As a result, the U.S. Dollar surged, driving gold prices down to new three-week lows, with XAU/USD around $2,652.29, showing no signs of reversing.

Trump‘s victory also boosted U.S. indexes to record highs, while government bonds fell, pushing Treasury yields to multi-week highs. The 2-year note offers 4.28%, and the 10-year note yields 4.46%, advancing faster. As the Federal Reserve prepares to announce its monetary policy on Thursday, expectations are high for a 25 basis point rate cut. Market focus will be on Chairman Jerome Powell’s comments regarding the implications of Trumps return for U.S. economic policies.

Technical Analysis:

From a technical perspective, the daily chart for XAU/USD shows strong bearish pressure. Technical indicators are declining after crossing into negative territory, heading down sharply. The pair has also fallen below the bullish 20 Simple Moving Average, now around $2,714. The 100 and 200 SMAs remain bullish but are situated well below the current level, indicating potential for a rebound.

On the 4-hour chart, the pair appears to have found an intraday bottom. XAU/USD has dropped below all moving averages, with the 20 SMA accelerating the decline, although it remains above the 100 and 200 SMAs. Longer moving averages have lost upward momentum, while technical indicators have slowed their decline but remain in extremely oversold territory.

Product: GBP/USD

Prediction: Decrease

Fundamental Analysis:

GBP/USD dropped below the 1.2900 level on Wednesday as the U.S. Dollar strengthened following the clear outcome of the presidential election. Both the Bank of England and the Federal Reserve are expected to announce quarter-point rate cuts on Thursday.

The pair fell sharply early Wednesday as the Dollar gained strength from election developments. After a brief rebound in the European morning, GBP/USD was last seen near 1.2900.

The Dollar surged after news outlets declared Donald Trump the winner in Georgia and North Carolina—two battleground states he lost previously. Trump secured 267 of the 270 electoral votes needed for victory, leading in Michigan and Wisconsin, which remain uncalled.

The election results prompted a rise in U.S. Treasury bond yields. Market sentiment appears cautious about aggressive Fed easing, with the Fed's monetary policy announcement due Thursday. Meanwhile, U.S. stock index futures rose between 1.8% and 2.7%, suggesting a strong market opening that could limit the Dollar's gains and support GBP/USD.

Technical Analysis:

The Relative Strength Index on the 4-hour chart is below 50, indicating weak recovery momentum.

On the downside, the first support level is at 1.2850, followed by 1.2800, which is the 200-day Simple Moving Average. If GBP/USD can establish 1.2900 as support, it may continue its recovery toward 1.2930 and then 1.3000, where the 100-day SMA is located.