USD May Rebound as Election Polls Narrow in Key States

2020 Election, US Dollar Analysis, 2020 Polls, Biden-Trump Spread – Talking Points

  • US Dollar may stage a bold comeback if uncertainty about the election persists
  • Demand for havens may be magnified if election appears to tilt towards Trump
  • AUD/USD initially surged but gains appear to be getting capped at key ceiling

US PRESIDENTIAL ELECTION UPDATE

Investors and policymakers alike remain glued to their screens as polling updates in key states continue to cross the wires. The states of interest are: Georgia, Pennsylvania, North Carolina, Arizona and Nevada. If Democratic nominee Joe Biden is able to claim the latter two, then it does not matter if Trump wins the other votes. By that point, the incumbent President will not be able to catch up.

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Consequently, what happens in Nevada will be critical. State officials said that updated election results will be released on Wednesday. Georgia looks like it will go to Trump but by a thin margin. The BBC wrote:

If Mr. Trump does lose Wisconsin (10 Electoral College votes), he must win Georgia (16 votes), North Carolina (15), Pennsylvania (20) and either Arizona (11) or Nevada (6) to prevail”.

So far, Mr. Biden has won the most votes out of any US presidential candidate in history with a total of over 70 million, vs 67.2 million for Trump. The former has 243 electoral votes while the latter has 214. The incumbent has asked for a recount in Wisconsin, claiming a notable amount of “irregularities in several Wisconsin counties”. Since the margin between Trump and Biden is less than one percent, state law permits a recount.

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The key takeaway is that prolonged uncertainty makes financial markets vulnerable to spikes in volatility if the outcome they are expecting – what appears to be a Biden win – turns out to be false. Because the implications of each candidate’s victory are so different in terms of their impact on the global economy, the states in the election seemingly could not be higher.

AUD/USD Analysis

AUD/USD burst through descending resistance, but its gains appear to be getting capped at the lower bound of a multi-tiered ceiling between 0.7181 and 0.7206. Not entirely by coincidence, this phenomenon is occurring in conjunction with uncertainty pertaining to the election. Looking ahead, these technical levels may hold as long as ambiguity pertaining to the election stays, but may then soon be invalidated after a result is finally announced.

AUD/USD – Daily Chart

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AUD/USD chart created using TradingView

— Written by Dimitri Zabelin, Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or@ZabelinDimitrion Twitter

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