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US dollar price forecast for October

2020-09-30

2020-09-30

Forex in October: All come to vote! Forecast for EURUSD, GBPUSD, AUDUSD and NZDUSD as of 30.09.2020Dmitri Demidenko

Who will win on November 4? Donald Trump or Joe Biden? The answer to this question will determine the trends for dollar pairs. I will analyze the Forex trends statistically and offer a trading plan

Monthly US dollar forecast for October

Every four years, October becomes a really hot month for financial markets. Whatever drove them in previous periods, be it trade wars, monetary policy, recession, or pandemic, former drivers fade into the background. Investors are getting focused on the US presidential election. So, the candidates’ approval ratings have now more impact on the Forex rates than the US jobs reports or the speeches of the Fed’s officials. The markets are concerned about the vote, and it is natural. The result will influence not only the world’s largest economy but also the global GDP.

According to the statistics, none of the G10 currencies was a great performer ahead if the election. The euro and the dollar performed a little better than the others, but there were not any regularities, any currency could surprise by a rally or a crash.

Rise-and-fall periods ahead of the US presidential election

Source: BoE, LiteForex analysis

In 1975-201, the best-performing currencies of October were the AUD, the NZD, and the euro. The Japanese yen was most commonly an outsider. It means the risk appetite should grow, and the US stock indexes could resume the uptrend.

Rise-and-fall periods in 1975-2019

Source: BoE, LiteForex analysis

In the twenty-first century, the situation is hardly different. In 200-2019, the Australian dollar, the New Zealand dollar, and the British pound were the strongest. The Japanese yen and the Swiss franc were most often among the outsiders.

Rise-and-fall periods in 2000-2019

Source: BoE, LiteForex analysis

In the best years, the Australian dollar usually grew versus the US dollar by 2.3% on average in October. The NZD rose by 2.4% against the USD, the euro strengthened by 2.1%. The median values of these currencies in the 1975-2019 period were 0.9%, 0.2%, and 0.7%, correspondingly.

Dynamics of currency rates during rise-and-fall periods

Source: BoE, LiteForex analysis

Averages and Medians

Source: BoE, LiteForex analysis

In my opinion, whoever wins the November 4 election, the lower uncertainty will encourage investors to buy risky assets. Donald Trump promises to further lower taxes and stimulate the economy. Joe Biden’s victory could weaken the dollar because of the growth of the US twin deficit and lower risks of the trade war escalation, which is good for the global economy. As the election date is getting close, investors should realize that the [S&P 500][1] will resume the uptrend anyway, supporting the income-generating assets.

Monthly trading plan for G10 currencies

Purchases of the [AUD/USD][2] and the [NZD/USD][3] on the fall correspond to recommendations to invest in the currencies of the countries that cooperate with China. The reason to buy the [EUR/USD][4] and the [GBPUSD][5] is not only the US presidential election but also the progress in the EU-UK talks, which revives the hope for a Brexit deal. In the case of a no-deal Brexit, both the pound and the euro will be under pressure.

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Price chart of EURUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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