Out of the many words that could describe this week, intense feels like the best fit.
It has been three days since Election Day for the US presidential polls, but the stalemate between Donald Trump and Joe Biden continues. With all the political drama and uncertainty experienced over the past few days, investors across the globe may use the weekend to refresh in preparation for more drama and potential choas in the week ahead!
In a nutshell, the current results show a razor-thin race for the Whitehouse with Biden securing 264 electoral votes while Trump 214.
While Biden may be one state away from the Oval Office, anything can happen over the next few days to weeks. There are so many variables to consider from Trump securing key swing states, to delays due to the huge number of postal ballots. Even the possibility of Trump contesting the results and seeking the Supreme Court’s intervention. Let’s just say that the next few weeks may be wild for markets with global equities, currencies and commodities all likely to be influenced by the election drama.
Shifting our focus to currencies, it has not been the best of trading weeks for the mighty Dollar.
One of the primary factors behind the Dollar’s depreciation were market expectations around Biden winning the presidential race. Even if he secured 270 electoral votes with a divided Congress, investors were hopeful over this outcome opening the doors to a smaller fiscal package. Something is always better than nothing right?
While the Dollar could extend losses in the near term, a rebound may be on the cards if the threat of a contested election outcome reduces the possibility of another coronavirus rescue package in 2020.
Earlier this afternoon, the US jobs data dished out an upside surprise. Another 638,00 jobs were created in October versus the 600,00 expected. The unemployment rate dropped to 6.9% from 7.9% while average hourly earnings rose just 0.1% mom below the 0.2% expectations. Overall, this was a positive jobs report reconfirming the US economic momentum heading into the final quarter of 2020. However, rising coronavirus cases may sabotage the current recovery. The election drama does not help matters either.
Looking at the technical picture, the Dollar Index remains under pressure on the daily charts. Prices are slowly approaching the 92.00 support level. A decisive breakdown below this point could encourage a decline towards levels not seen since April 2018 around 90.00.
In the commodity space, the impressive gains witnessed on Gold this week were mostly attributed to Dollar weakness and market expectations over Joe Biden reaching the finish line.
However, with nobody knowing when the official election results will be released, the current stalemate could fuel risk aversion – something that may end up supporting the Dollar. Such a development could cap Gold’s upside gains despite the risk-off mood.
Talking technicals, the precious metal offered a muted response to the US jobs report with prices trading around $1950.82 as of writing. The daily close above $1935 could trigger an incline towards $1965 and potentially $1985.
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