DXY: Pullback Expected With US Election Results Causing Uncertainty
Last week finally saw DXY reach and just about breach the 97.00 resistance level. This breach, however, could not be sustained with last Thursday's candlestick being a big bearish engulfing whipping price back to the downside. It seems, for now, that price is very reactive to this key level and is unlikely to break above any time soon with current economic events. What we will likely see in the near-term is price consolidating between the 95.00 and 96.00 levels.
The key factor behind this weeks Dollar weakness is due to the Mid-term elections with President Trump receiving a blow from the Democratic party, who have taken control of the US House of Representatives. This is a Historical trend for the party that is not in the Whitehouse to make gains mid-term. This will restrict Trumps ability to steer his programme through Congress. The Democratic party may prove to be a real headache for the President with the newfound ability to investigate his administration and business affairs, including tax returns and conflicts of interest.
All of this uncertainty for Trump's influence is likely to cause turbulence for the USD as with a Democrat-controlled House and a Republican-controlled Senate it would prove difficult for the President to drive forward any major fiscal initiative. These events are definitely Bearish for the Dollar with the potential for more downside movement against other major currencies.
Written by Sam Moore (Instagram: @Moore_FX)