EURGBP TECHS: Bear Threat Still Present

• RES 4: 0.9066/9266 High Sep 28 / High Sep 26 and key resistance
• RES 3: 0.8980 High Sep 29
• RES 2: 0.8867 High Nov 12
• RES 1: 0.8785 High Nov 04
• PRICE: 0.8722 @ 16:18 GMT Nov 7
• SUP 1: 0.8677 50-day EMA
• SUP 2: 0.8560/59 Low Oct 31 / 76.4% of Aug 2 - Sep 26 rally
• SUP 3: 0.8522 Low Aug 30
• SUP 4: 0.8471 Low Aug 28

EURGBP is starting the week on a firmer note, following last week’s gains and the recovery from 0.8560, the Oct 31 low. The cross has pierced a key short-term resistance at the Oct 21 high of 0.8781. A clear breach of this hurdle would reinstate a bullish theme and open 0.8867, the Oct 12 high. . For bears, a reversal lower and a move through last Wednesday’s low of 0.8585 would resume recent bearish activity.

A quick look at asset class performance following the 3 most recent elections:

• In the 2016 elections when Trump beat Clinton against most expectations, the immediate knee-jerk reaction was "sell everything" with equities and Treasuries, and USD sinking. But this looked more of a reactionary move to a badly mispriced outcome (going into election day, Clinton was priced 80-90% to win by bookmakers, similar to the probability attributed to the Democrats losing congressional control this year). Ultimately equities and the USD resumed their longer-term uptrends with Treasuries continuing lower as multiple pro-cyclical macro possibilities emerged, including tax cuts.
• In 2020, while the eventual outcome (Democrat sweep) was mostly priced in (60-65% odds), we had to wait until January 2021 for Senate control to be determined by Georgia runoffs - that might occur again this time. The market reaction wasn’t complete until months after the election, when the expansionary fiscal implications could be priced. Stocks ascended with USD falling and Tsys drifting lower after the November elections; however starting in January, the USD bottomed out and Tsys began to plunge (equities continued to rise).
• But the best recent analogy for the 2022 election setup is the last midterms in 2018: an incumbent president's party faced a loss of Congressional control (the Democrats were seen with an 80-90% chance of winning control of the House with Republicans a similar % of retaining the Senate). That's what played out, and there was little market reaction. However, economic and market headwinds emerged in the year following, which among other things saw the Fed end and reverse its hiking cycle.

US President Joe Biden has called Israel's Prime Minister-elect Benjamin Netanyahu to congratulate him on last week's election win,.

• According to Amichai Stein at Kan, the call took eight minutes and Biden said: "We are brothers, we will make history together. My commitment to Israel is unquestionable."
• Netanyahu responded: "We will bring more historic peace agreements, that is within reach"
• Netanyahu's re-election at the head, what the NYT's described as, "one of the most right-wing coalitions Israel has ever known" has led to fears that some of the diplomatic achievements of the part five years, including the signing of the Abraham Accords and Israel's increasing regional integration may be under threat.
• Benjamin Netanyahu met far-right Ben Gvir today for the firrst time for informal coalition talks.
• Ben Gvir said in a statement after the meeting that it was "...held in a good atmosphere. We are on our way to establishing a full, full right-wing government, that will look people in the eye, some of whom are afraid to walk around the Negev and Galilee, return their security, and return their governance. We have a lot of work.”