US Dollar dips to fresh weekly loss ahead of US election results


  • The US Dollar price action is easing as the US heads to the voting booths on Tuesday. 
  • Traders brace for volatility as it could take days or weeks to know who will be the next US president in case of a very tight result.
  • The US Dollar index trades just below 104.00 and hangs onto important technical support. 

The US Dollar (USD) turns a touch softer on Tuesday after the US opening bell, with the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trading further below 104.00 as markets brace for the US presidential election. Chances that markets will know if either Vice President Kamala Harris or former US President Donald Trump will claim victory by Wednesday look rather slim. No less than 165 lawsuits have already been filed on election fraud and recount requests even before the voting has started. 

This could mean that this 60th presidential election could surpass the 46 days of legal uncertainty last seen when George W. Bush won in 2000. Only a landslide victory by several points could avoid a legal battle that would plunge markets into uncertainty going into year-end. 

The US economic calendar includes the final readings of the S&P Global and the Institute for Supply Management (ISM) Services Purchase Managers Index (PMI) for October. No real changes are expected from preliminary readings.

Daily digest market movers: Forget about it

  • Look out for headlines risk on Tuesday and Wednesday in case no clear winner is declared in the 60th US presidential election. 
  • At 13:45 GMT, S&P Global has released the final reading for October’s PMI. Services PMI came in a touch softer at 55 against the 55.3 in the initial reading.
  • Around  15:00 GMT, the ISM has published its final reading for October’s services sector. The ISM Services PMI jumped to 56, coming from 54.9.
  • Ahead of the first possible headlines on the US presidential election, the US Treasury is auctioning a 10-year note around 18:00 GMT. 
  • US equities are in a good mood and are heading higher with the Nasdaq up near 1% on the day while the US casts its votes. 
  • The CME FedWatch Tool is backing a 25 basis point (bps) interest-rate cut by the Federal Reserve (Fed) on Thursday’s meeting with a 98.0% probability. More interesting is the December 18 meeting, where a 50 bps interest-rate cut from the current level is expected by an 81.7% chance, suggesting that markets anticipate a rate cut this week and in December. 
  • The US 10-year benchmark rate trades at 4.36%, making its way back up to the 4.38% last seen at the close last Friday.  

US Dollar Index Technical Analysis: Landslide is the key

The US Dollar Index (DXY) is having its calm moment before the storm. It looks to be very unpredictable what the US presidential election outcome will be on Wednesday when the world will wake up. The DXY is clinging onto the 200-day Simple Moving Average (SMA) at 103.84, and it is expected to whipsaw through it in the next 24 hours once results come in. 

The DXY has given up two key levels and needs to regain control of them before considering recovering toward 105.00 and higher. First up is the 200-day SMA at 103.84, together with the 104.00 big figure. The second element is the October 29 high at 104.63. 

On the downside, the 100-day SMA at 103.12 and the pivotal level of 103.18 ( March 12 high) are the first line of defence. In case of rapid and volatile moves this week, look for 101.90 and the 55-day SMA at 102.16 to consider as substantial support. If that level snaps, an excursion below 101.00 could be possible. 

US Dollar Index: Daily Chart

US Dollar Index: Daily Chart

Banking crisis FAQs

The Banking Crisis of March 2023 occurred when three US-based banks with heavy exposure to the tech-sector and crypto suffered a spike in withdrawals that revealed severe weaknesses in their balance sheets, resulting in their insolvency. The most high profile of the banks was California-based Silicon Valley Bank (SVB) which experienced a surge in withdrawal requests due to a combination of customers fearing fallout from the FTX debacle, and substantially higher returns being offered elsewhere.

In order to fulfill the redemptions, Silicon Valley Bank had to sell its holdings of predominantly US Treasury bonds. Due to the rise in interest rates caused by the Federal Reserve’s rapid tightening measures, however, Treasury bonds had substantially fallen in value. The news that SVB had taken a $1.8B loss from the sale of its bonds triggered a panic and precipitated a full scale run on the bank that ended with the Federal Deposit Insurance Corporation (FDIC) having to take it over.The crisis spread to San-Francisco-based First Republic which ended up being rescued by a coordinated effort from a group of large US banks. On March 19, Credit Suisse in Switzerland fell foul after several years of poor performance and had to be taken over by UBS.

The Banking Crisis was negative for the US Dollar (USD) because it changed expectations about the future course of interest rates. Prior to the crisis investors had expected the Federal Reserve (Fed) to continue raising interest rates to combat persistently high inflation, however, once it became clear how much stress this was placing on the banking sector by devaluing bank holdings of US Treasury bonds, the expectation was the Fed would pause or even reverse its policy trajectory. Since higher interest rates are positive for the US Dollar, it fell as it discounted the possibility of a policy pivot.

The Banking Crisis was a bullish event for Gold. Firstly it benefited from demand due to its status as a safe-haven asset. Secondly, it led to investors expecting the Federal Reserve (Fed) to pause its aggressive rate-hiking policy, out of fear of the impact on the financial stability of the banking system – lower interest rate expectations reduced the opportunity cost of holding Gold. Thirdly, Gold, which is priced in US Dollars (XAU/USD), rose in value because the US Dollar weakened.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD treads water just above 1.0400 post-US data

EUR/USD treads water just above 1.0400 post-US data

Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.

EUR/USD News
GBP/USD remains depressed near 1.2520 on stronger Dollar

GBP/USD remains depressed near 1.2520 on stronger Dollar

Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.

GBP/USD News
Gold keeps the bid bias unchanged near $2,700

Gold keeps the bid bias unchanged near $2,700

Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.

Gold News
Geopolitics back on the radar

Geopolitics back on the radar

Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.

Read more
Eurozone PMI sounds the alarm about growth once more

Eurozone PMI sounds the alarm about growth once more

The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures