We’re coming off another day of distribution that saw US stock markets open higher then decline through the day. A number of significant moves have accelerated that suggest technical support and resistance has started to give way and big course reversals may be getting underway. The Dow finished down over 100 points but it did manage to cling to 18,000 round number support for now while the S&P clung to 2,100. I've been warning for weeks that the markets have been too complacent about the US election and that overcommitting to a Clinton win was leaving traders exposed to a Brexit level surprise. Donald Trump's campaign has been picking up momentum in earnest closing a 12 point gap and taking the lead in some polls. Today traders started taking the potential for a Trump win or a contested election much more seriously. A close vote or Republican upset could increase political uncertainty and market risk especially with such wide differences between the two platforms. The realization that Trump could win sent stocks sharply lower toward key support levels. It also started to drag USD down on speculation that post-election volatility could postpone a Fed rate hike or slow the pace of future increases. Increased political uncertainty sparked rallied in traditional defensive havens. Gold led the charge but more importantly the defensive rally gained breadth with JPY joining in shrugging off a neutral to dovish Bank of Japan. This action sets the stage for Wednesday's Fed decision. Normally with an election less than a week away one would expect the Fed to go very quiet. As far as the economy goes, it doesn't really matter if the Fed raises rates now or next month, one rate hike this year is widely expected. So whatever decision we get may be more guided by politics. The Fed may not be able to escape the spotlight this time regardless of what it does. Bank of England Governor Mark Carney politicized his office earlier this year taking the Remain side in the Brexit referendum and scrambling to deal with that loss. In the US, the FBI is under fire from the Democrats for reopening the Clinton investigation, the Fed could come under fire from either of both sides depending on what it does. Donald Trump has already accused the Fed of keeping interest rates artificially low this year to prop up the economy and that may continue if the Fed does nothing. Fed Chair Yellen and Governor Brainard have well known ties to the Democrats, and could lose influence if Trump wins. With the Democrats losing ground, a surprise interest increase is looking possible. First, a rate hike spun as driven by a strong economy could be seen as a sign Obama economic policies are working and undermining Trump's calls for change. Second a rate hike could be seen as a pre-emptive move as there has been speculation that volatility related to a Trump win could close the window to a December rate hike. So no increase would mean the Fed remains confident in a Clinton win . A rate hike could be seem as the Fed hitting the panic button and that Democrats are worried about being punted back into opposition. Fed and election speculation is likely to dominate today's trading but NZD may also attract attention around today's New Zealand employment numbers. Crude oil may come under more pressure after US API inventories jumped by over 9 million barrels last week and may remain active through Wednesday’s DOE reports. Corporate News TransCanada $0.78 vs street $0.68, selling US northeast power business for $3.7B, has decided not to sell any of its Mexican natural gas pipelines, will sell equity instead to fund Columbia Pipeline acquisition Economic News Significant announcements released overnight include: US API Oil inventories 9.3 mmbbls Canada Aug GDP 1.3% as expected Manufacturing PMI Reports: US Markit 53.4 vs street 53.2 US ISM PMI 51.9 vs street 51.7 US ISM new orders 52.1 vs previous 55.1 Canada 51.1 vs previous 50.3 UK 54.3 vs street 54.5 vs previous 55.4 Sweden 58.4 vs street 55.0 Norway 52.7 vs street 52.8 Russia 52.4 vs street 50.9 Greece 48.6 vs street 49.9 Upcoming significant economic announcements include: (Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore) 8:45 am AEDT NZ Q3 employment change street 5.4% 8:45 am AEDT NZ Q3 unemployment rate street 5.1% 8:45 am AEDT NZ Q3 average hourly earnings street 1.0% vs previous 0.8% 12:00 am GMT UK BRC shop prices previous (1.8%) 7:00 am GMT UK Nationwide house prices street 4.9% 8:55 am GMT Germany unemployment change street (1K) 8:55 am GMT Germany unemployment rate street 6.1% 8:15 am EDT US ADP payrolls street 165K vs previous 154K 9:45 am EDT US ISM New York previous 49.6 10:30 am EDT US DOE crude oil inventories street 2.0 mmbbls 10:30 am EDT US DPE gasoline inventories street (1.0 mmbbls) 2:00 am EDT US FOMC interest rate and statement 0.50% no change expected Upcoming Manufacturing PMI reports: 8:55 am GMT Germany street 55.1 8:50 am GMT France street 51.3 8:45 am GMT Italy street 51.4 8:15 am GMT Spain street 52.6 9:30 am GMT UK construction street 51.8 vs previous 52.3 CMC Markets is an execution only service provider. 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