The U.S. election is only four days away and many polls had Democratic Nominee Joe Biden in front by a comfortable margin. This lead may be dwindling and we have to consider how stocks and the U.S. dollar would react to a Trump win.
In an article from the Hill, Don’t believe the polls — Trump is winning, the sampling methods were criticized and these are always conducted with a very small group. We have to consider the most important point, which is the “silent majority” and the Hill points to registrations which have seen seven times as many Republicans than Democrats signing up to vote since 2016.
The U.S. dollar topped with the mid-March panic lows in markets but the dollar index has been steadily lower since the week of April 8th, which is when Joe Biden took over from Bernie Sanders as the Democratic frontrunner. President Trump has run on policies of domestic strength and has looked to play hardball with the country’s trading partners- as seen when he tore up NAFTA and pushed China to begin new trade talks. Joe Biden’s policies would be more globalist, but he would also commit to increased spending. The Democrat’s desire for a $2.2 trillion stimulus bill versus the Republican’s push for a $1.5 trillion figure is a clear example. Biden would also push heavier spending via the Green New Deal, which has been a key policy of many in the Democratic aisle of the House.
The U.S. dollar has already seen the touchpaper lit for a further rally after yesterday’s release of third-quarter GDP came in at a record 33.1% versus the expected 31%. The week has also seen the Canadian, Japanese, and European central banks leaning towards further stimulus measures, which removes some of the dollar’s bearish sentiment in recent months as the worst nation for runaway spending and stimulus. The situation would be similar for stocks, where the rally from 2017 was largely-based on a Republican low-tax environment.
On the weekly chart, the dollar index has found support at the 93.00 level and is setting up a strong weekly close for the week. The next target is 94.62 but if the USD breaks above that level then it can target the 50 moving average near 97.00. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.
