EUR/USD. Pennsylvania contention: Biden and Trump fight over key state

Trading 04 Nov 2020 Donner votre avis

Dollar pairs continue to show impulsive and contradictory price movements in response to news flow from the US. The euro-dollar pair was no exception - over the past 24 hours, traders of this pair have visited both the bottom of the 16th figure and almost the boundaries of the 18th price level (the price high was fixed at 1.1770). But in the end, the American elections disappointed both bulls and bears: buyers were unable to develop the growth trend, while sellers were unable to gain a foothold at price lows. Now the pair is frozen at the bottom of the 17th figure, waiting for the next information drivers.

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Take note that at the moment the market evaluates primarily the likelihood of a political crisis in the United States. Whereas the "Trump or Biden" dilemma is discussed in the second paragraph. The fact is that the dollar is now growing only on the outbursts of anti-risk sentiment. This is facilitated by the absence of a clear winner in the elections, while the uneven counting of votes either strengthens or weakens the position of Joe Biden. Donald Trump, in turn, only adds fuel to the fire - he declared himself the winner ahead of schedule and announced an appeal to the Supreme Court "if his victory is stolen."

In other words, unless the Democrat demonstrates a clear and undeniable victory, Trump is likely to get involved in a legal battle, questioning the results of the vote count (especially with regard to the "mail vote"). In this case, the dollar will be in high demand, since the country will live in a regime of political uncertainty for several weeks. Conversely, if Biden decisively widens the gap (so much so that the lawsuit will be unpromising), then the market will be dominated by risk interest, while the US currency will weaken against the basket of major currencies.

That is why, as soon as Biden wins this or that local battle (that is, wins in this or that state), anti-risk sentiment decreases, and dollar bulls retreat. When a mirror situation occurs, the greenback tries to regain lost ground. This state of affairs does not bring profit to either bears or bulls. For example, if we talk directly about the euro-dollar pair, then by the end of the previous day it returned to the same values where it stayed. At the same time, the range of price fluctuations is almost 200 points. Each side is trying to seize the initiative, but in the end EUR/USD stands still.

However, the latest reports from the electoral front suggest that Joe Biden's positions are gradually strengthening. As you know, in order to win one of the candidates needs to receive 270 electoral votes (their number is unevenly distributed across the states of the country). At the moment, Trump has 213 votes, Biden has 238. The main struggle has unfolded for Pennsylvania, which may present 20 electoral votes. This will be enough for Biden to consolidate his success and eventually get the presidency of the United States. If Pennsylvania gets to Trump, then the uncertainty about the election results will increase again (and, therefore, the dollar will strengthen again on the wave of rising anti-risk sentiment).

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According to the latest official data, Trump is now leading in Pennsylvania, and by a significant margin - almost 10% of the vote. But there is bad news for a Republican too. The fact is that many votes in this state have not yet been counted (about 25%), and we are mainly talking about those ballots that came by mail. Whereas, according to American sociologists, remote voting is mostly preferred by supporters of Democrats. This means that Biden has a sufficiently large gap that could ultimately change the results of elections in the state. At least the calculations of the influential newspaper The New York Times confirm that the so-called mail votes will be enough for Biden to win the Pennsylvania electors. The situation is similar in North Carolina and Georgia. At the same time, the leader of the Democrats has already managed to gain leadership in two other key states - Wisconsin and Michigan.

Dollar pairs are very sensitive to news from US polling stations - and the euro-dollar pair is no exception. Trading is extremely risky under such conditions, given Biden's fragile position, Trump's statements and looming street protests. In the short term, the vector of the EUR/USD price movement will depend on the results of the counting of votes in Pennsylvania. If Biden gains a foothold in this state, the pair may jerk upward, updating this week's high (roughly to the borders of the 18th figure). But there is also a flip side of the coin: after losing to Pennsylvania, Donald Trump will significantly toughen his rhetoric: the general leitmotif of his statements will be that the results of the mail vote are falsified. In this case, buyers of EUR/USD will not be able to hold the conquered positions, and the pair will collapse into the area of the 16th price level. And this is just one of several possible scenarios for the development of events. Given such a high degree of uncertainty, it is not advisable to open any trading positions for the pair.

The material has been provided by InstaForex Company - www.instaforex.com

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