US Dollar Index Forecast November 7, 2012, Technical Analysis

The US Dollar Index rose during the session on Tuesday, but was repelled at the 81 handle. With the United States trying to elect a President during the session, this of course will have a great influence on how the US dollar moves in general. With this being said, it is very difficult to take the results of the session to heart, as the election results won’t be in until after the end of the session.

The 81 handle is the beginning of significant resistance, so it makes sense that we fail to break over it during the session. The candle for Tuesday is in fact a shooting star, but if a surprise election result comes about, the candle shape will mean very little.

It is assumed that the market must be thinking that Obama will be reelected, as his administration has been very quick to spend, and the Federal Reserve has been printing the Dollar hand over fist during the last four years. It is well-known that Gov. Romney is not a big fan of how the Federal Reserve has been acting, and will certainly not re-nominate Ben Bernanke for Federal Reserve Chairman. With this being said, a Romney win would be extremely strong for the dollar as we suddenly would see a tighter monetary policy out of the United States.

Is because of this it is very difficult to suggest a trade at this point in time. However, if we managed to break above the 81 handle and the Romney campaign manages to win the presidency, we believe this market will rise quite rapidly. More than likely, during the session the Dollar bulls simply pullback at the first sign of resistance, as the elections were an unknown quantity.

If we fall, one has to think that there is a lot of noise below, and we could find support relatively quick. It really is going to come down to how traders see the possibility of a financial cliff solution coming over the next couple of months. If they don’t see much of a chance, this market will become extremely erratic.