Before the elections, it could have been perceived that the market had largely priced in Donald Trump’s victory. The rise of the dollar index in October was the best evidence. At the same time, the strengthening of the USD triggered an American debt yield rally. Just before November 5th, the world’s main currency’s appreciation halted and even a slight correction happened, driven by changes in polls in Iowa over the past weekend.
The overnight exit polls indicating Trump’s clear dominance caused the market to believe more strongly that a new presidency would be beneficial for the dollar. This could be true if Trump implements his announced policies: high tariffs and tightened immigration policy. However, the market response lacks any visible fear that the incumbent/new president would undermine the independence of the Federal Reserve. The market seems to assume that Trump would want to defend the dollar, and prevent China’s plans regarding the yuan, from being realized. This refers to China’s intentions to develop the BRICS block, which would be seen as some kind of foundation for breaking the dollar’s global dominance, which is unprecedented in foreign trade.
Of course, the market will check in time how many of the new president’s promises have become real actions and how many of them were just pre-election empty declarations.
From a technical perspective, today’s euro-dollar declines violate the medium-term uptrend line, which is somewhat symbolic and, in my opinion, not accidental. Local support at this moment is 1.07 – 1.0680 and the next one is at 1.06, breaking through we should look at 1.0450 – the low from early October last year. Now it’s time for the Fed.
Łukasz Zembik Oanda TMS Brokers
Source: https://ceo.com.pl/wygrana-trumpa-niemal-pewna-rynek-reaguje-umocnieniem-dolara-67018
