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Andreas Zanin
Analysis | November 5, 2020

FX Outlook: Analysis USD/CAD USD/CHF

Market Discounting A Joe Biden Win

05/11

In terms of the US Elections, it is likely that Joe Biden will win and betting odds show a 75% probability of a Biden victory. Biden has 243 Electoral College votes, giving him the edge in the race to accumulate the 270 needed to win whilst Trump has 214 votes.

In terms of states which will decide the election, Trump is expected to lose Wisconsin’s 10 electoral college votes. If he does lose then he must win Georgia (16 votes), North Carolina (15), Pennsylvania (20) and either Arizona (11) or Nevada (6) in order to triumph. It is unlikely and the market is now focused on a Biden win but there is not going to be a “blue wave” with the Republicans likely to hold the senate.

We have seen some USD weakness but we haven’t seen the USD melting away to the downside as the market was looking for a landslide victory at the start of the week. In terms of the USD, speculators are heavily short and the Biden win is getting discounted.

In terms of the two pairs below USD/CAD and USD/CHF, the USD has moved down but in both pairs, we are trading above key support levels and downside volatility has dropped. Major support is expected to hold in both pairs and we view the USD as a buy on strength.

Technical Analysis

USD/CAD Daily Chart: We saw the USD sell off from the 1.3400 level on the view of a Joe Biden landslide win but have found support into the 1.3100 level – We would view the USD as a buy back above the 1.3200 level for a rally up to 1.3400 then 1.3700 level with a stop behind major support at 1.300.

USD/CHF Day: We have come down from the 0.9200 at the start of the week but we are near strong support and speculators hold a 10 year high in terms of short positions. With the market already short USD we are looking to buy a move above 0.9200 or if we test support we would look to buy any signs of a reversal – Stop protection on both trades behind the 0.9000 level.

 

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