US dollar price forecast 4 November 2020

2020-11-04

Dollar discloses secrets. Forecast for 04.11.2020Dmitri Demidenko

The reaction of securities, currencies, and other assets signals that Trump could be reelected. However, the election results are not known yet; the market may be wrong. Let us discuss the forex outlook and make up a [EURUSD][1] trading plan.

US dollar fundamental forecast today

Technical analysts argue that the price chart includes all the information. If so, Donald Trump could repeat the trick of 2016 and win the 2020 election when no one expects him to. The stock market goes up as the election results won’t be rejected. The bond market is bullish as investors may not expect additional fiscal stimulus and Treasuries issue. The dollar is rising because it strengthens when Trump succeeds. Forex also signals the likely victory of Trump.

Reaction of the securities market to the interim voting results

Source : Bloomberg

It would seem that Joe Biden’s victory is obvious. According to the AP VoteCast poll, 40% of more than 100 thousand respondents named coronavirus as the United States’ main problem. 25% complained about a recession. Among those who considered the pandemic the main problem, three quarters were going to vote for Biden. Among those who spoke about economics, 80% would elect Donald Trump as the president. The huge number of deaths due to COVID-19 should have outweighed any argument of the current US president. Alas! Trump leads in swing states.

Early voting results

Source : Wall Street Journal

Betting markets have radically changed the outlook. According to Betfair and Smarkets Exchange, Trump’s chances of retaining the presidency rose from 39% to 60% and from 33% to 74%. Forex also suggests Trump be a favorite. Those currencies that were supposed to become the main beneficiaries in the event of Joe Biden’s victory (the Mexican peso, the Chinese yuan) are falling; the outsiders (the Russian ruble), on the contrary, are strengthening. Analysts believe that he would reward countries that abide by the rules (Mexico) and punish those who do not (Russia).

Fox News and NBC predict Democrats to retain the majority in the House of Representatives. If the Republicans retain control of the Senate and Trump is reelected, nothing will change in the USA. This fact highlights the reaction of different assets to the 2016 election.

Reaction of assets to the 2016 election

Source : Nordea Markets

The outsiders in 25 days after the election were gold and the euro. The primary beneficiaries of the unexpected victory of Trump were the dollar and oil. The absence of a huge monetary stimulus will slow down inflation, which should press down the [XAUUSD][2]. On the contrary, the oil should rise in value as the oil and gas sector will never see Joe Biden’s radical reforms.

[EURUSD][1] trading plan today

The greenback is strengthening amid the risks of the escalation of trade wars. Investors also hope the US GDP will outperform the euro-area growth amid the potential increase in the demand for the US assets, also because of the tax deductions. However, the final election results are not reported yet. The counting of votes is likely to last longer than expected. I don’t recommend entering any trades right now. The [EURUSD][1], as predicted, failed to consolidate above 1.1735, and the downtrend depends on Trump.

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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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