Trading Currencies: Waiting for a Blue Wave or Status Quo?The US election is on a final countdown. To what extent will the result weigh on the US dollar? Find out more about the latest FX trends in this week’s market analysis.
Under a week into the US election and there is also already a statistic that is standing out. Early voting in the US has reached 50.2% of the total vote cast in 2016. That puts the 2020 election on track for the highest ballots cast in US history. If a winner can be announced on Tuesday, it should be decisive, however nothing is assured in the lead-up to this election.
The volatility index (VIX), also known as Wall Street’s fear index, has been on the rise and it surged to above 40 on Thursday, which is its highest level since June. It is obvious that the US election uncertainty is adding pressure to the markets. Volatility is likely to be high and market gaps might appear.
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Currently, the election is creating a very short-term ‘nervous lull’ in currencies as seen by the soft ranges in the USD.
Pairs That Are Worth Paying Attention To:
EUR/USD is holding between $1.1796 and $1.1839 despite COVID issues flaring in France, Italy and now Germany. Further shutdowns and possible cuts to workforce and social interaction heading to the winter months is a daunting prospect for the already faltering European economy. The analyst team at Rabobank predicts that there is “risk of a dip to 1.16 in three months”. The pair has some real headwind risks coming in the next 8-10 weeks.
GBP/USD continues to rise now above $1.30. This is despite the fact that Brexit is becoming a huge risk for the pair and that the UK is bordering on having to enact strict stage 3 lockdowns for a second time this year. Receive the latest updates on world news for your trades.
AUD/USD too has been rangebound, holding between $0.7110 and $0.7160. There is an array of data due out this week that might move the dial here. But the reaction to the CPI released on Wednesday was next to nothing falling 10 pips even with a better read than expected. The pair is waiting for the RBA next Tuesday where it is expected the RBA will enter the quantitative easing market.
Key Dates to Follow Next Week
- Nov 3 (Tuesday) 14:30 (GMT +11) – RBA Interest Rate Decision
- Nov 4 (Wednesday) All Day (GMT +11) – Presidential Election
- Nov 5 (Thursday) 23:00 (GMT +11) – BoE Interest Rate Decision
- Nov 6 (Friday) 06:00 (GMT +11) – Fed Interest Rate Decision
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.