Trading Currencies: It Isn’t Over Until It’s Over

America has chosen Democrat Joe Biden as its 46th president of the United States. But it’s clear that President Trump will fight it out to the very end with legal challenges and recount petitions. This is far from over and currency markets are reflecting this.

Trends of Major Forex Pairs

Here are the ranges of the major pairs and the basket itself since the close of the polls on the East Coast to now.

EUR/USD

The euro edges higher against the US dollar as the election results are awaited. As of the time of press, it hit the one-week high 1.18 threshold.

USD/JPY

USD/JPY is traded with a negative bias amid a mildly softer tone surrounding the US dollar. Market’s hope for a blue wave victory is weighing on the USD.

GBP/USD

After the BoE expanded its QE program by £150 billion and maintained cash rates at the same 0.1% level, GBP/USD jumped to near mid-1.3000s.

AUD/USD

The Aussie pair continued to edge higher as the votes are counted. Analysts at UBS predicts that the Aussie pair is likely to surge towards 0.74 by Sep 2021.

DXY

It is obvious that US dollar index is falling on the uncertainty that is coming from the elections. Its momentum remains weak near the 93.42 region.

As expected, if Trump took Florida, which he did, FX markets would react strongly and would see a repeat of 2016 becoming fact. It certainly led the bookies to flip their betting markets as fast as they did in 2016 on Florida’s declaration and that sent currencies with it. This will likely to continue in the interim.

Election Results & Beyond

Going forward, now there are several factors to consider:

What does the Senate look like?

Currently it looks like the Republicans will hold the Senate and could hold up policy over the next 4 years. Tax and regulatory reform were pillars of Biden’s campaign; this scenario might now be watered down with a Republican-held Senate.

Other Factors Not To Be Left Out

Elections aside, there are still several important issues that traders should keep a close eye on in the near term:

• Nonfarm Payroll of October – Market is expecting the US economy to add 600K positions, with 661K jobs in the previous month. US employment sector is foreseen growing yet at a slow pace.
• Covid-19 – Cases keep mounting in the US as there were more than 100,000 new infections recorded in a single day.
• Brexit – 26 Nov will be the date when the trade deal must be negotiated and presented to the European Parliament. Yet, the UK and the EU are still stuck on the fisheries issues.

This article is prepared by Lucia Han from Mitrade and is for reference only. We do not represent that the material provided here is accurate, current or complete. The article content neither takes into account your personal investment objects nor your financial situation, and therefore it should not be relied upon as such. You should seek for your own advice.