Friday's CFTC report generally confirmed the trend that began to form in the previous couple of weeks – despite the fact that rates on Biden's victory are growing, the total short position on the dollar for the reporting week declined again, by 1.799 billion this time. In general, the situation looks unusual – while Biden's victory is likely perceived as bearish for the dollar's prospects, since it will mean an increase in budget spending and inflation expectations and, as a result, a decline in real interest rates, investors are not in a hurry to resume the sale of the dollar in futures.

The downward trend in the dollar's short position has been observed for the last 6 weeks. Despite this, the short position is still quite significant.

The volatility growth last Friday was due to the fact that Democrats and Republicans continued to discuss how much is needed for the new stimulus package. Everyone agrees that such a package is necessary; the only question is its scale. On Friday, Trump offered to increase aid by 1.8 billion, but this proposal was rejected immediately by the Speaker of the US House of Representatives, N. Pelosi. In turn, the Republicans strictly don't want to support Trump. There are rumors that they want to stay away from Trump's initiatives, since he is expected to lose the elections and going down with the loser is not in the traditions of American political culture.

Today is a holiday in the US, so volatility will be reduced in the afternoon.

EUR/USD

The net long position in the euro declined again, by 2.049 billion this time. The advantage is still significant, but the estimated price is sharply directed below.

Against the background of Biden's growing advantage based on opinion polls, the US dollar is falling against most currencies, which allowed the euro to go above the high of 1.1808. At the moment, the key resistance is 1.1858 (61.8% from the September fall) followed by the level of 1.1873. Despite the growth, we still maintain a bearish view of the EUR/USD. It can be assumed that a reversal will occur in the area of one of the indicated resistances, after which a second wave of decline will form with a target of 1.15 and below.

GBP/USD

The NIESR report on the UK's economic recovery rate was worse than expected. The country's GDP grew by 8%, 3 months before August. However, this happened in view of a pullback after falling by 20% in the first months of the pandemic, that is, the pullback does not cover even half of the decline.

According to NIESR, all major sectors of economies remain below their February 2020 levels, declining in the range of 8.5% to 10.8%. In August, the economy grew by 2.1%, the pace of recovery slowed sharply compared to previous months. For September, zero growth is predicted and it is likely to go into negative zone if quarantine restrictions are resumed.

Due to the fact that the UK economy will be approximately 8.5% by the end of the year, we can assume that it cannot yet provide internal drivers for the pound's growth. They can come from three sources – large-scale government measures, primarily tax breaks, a stimulus package from the Bank of England and a positive result of the Brexit negotiations. We exclude the first two points - the Bank of England is following in the wake of the Fed's policy, and the government is waiting for the results of Brexit negotiations and US elections.

Brexit continues. On October 15-16, there will be a summit of EU leaders, at which the results of the negotiations will be summed up. If even one key issue is officially resolved, the pound will have a basis for a sharp strengthening. In the meantime, we must assume that the estimated price is significantly lower than the spot price, but the decline has stopped, and the net short position has declined by 115 million (now only 910 million) at the end of the week, which is more in line with the neutral level.

The resistance zone is at 1.3150/80. Near this zone, a bullish signal may form as well as an upward breakdown, given that Brexit is positive. If there is no positivity, then a reversal and a decline to 1.2420/50 will be likely.