As we come into the US elections the market remains heavily short the USD (see chart below but we have seen some USD strength on the DXY chart below (Which measures the USD V a basket of currencies) as we see speculators exit short positions and we would expect more short covering into the result. If we breakout to the upside we would expect a major USD rally on higher volatility…
“Biden is ahead in national opinion polls, but races are tight in battleground states that could tip the election to Trump. And perhaps the outcome most likely to shake markets – at least in the near term – is no immediate outcome at all.” (Reuters)
It will be a close result in our view as per our recent post: For weeks, traders have bet on a “Blue Wave” with Biden becoming president and the Democrats getting control of Congress and the Senate. The USD negative scenario a Blue Wave is already being anticipated by the market. A narrow victory and the loser contesting the result is bullish the USD so too is a Trump victory.
02/11 DXY Dollar Index: The USD Has rallied up from recent lows and a breakout above recent highs is expected to follow through to the upside. Speculators are heavily short and we expect a run up to at least 98.00 to correct the oversold condition.
The market still remains heavily short the USD based upon the view Biden and the Democrats will win the election comfortably. The result will be closer than the polls predict in our view and Trump could win. We would expect traders to liquidate USD shorts into the result
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