Foreign Exchange Online - Masakazu Sato's Practical Trading Techniques | Techno & Fundamentals Analysis Predicting the Future of the 3 Major Currencies [This Month's Theme | The US Presidential Election is Finally Here! Review of Basic Trends and Stra

The U.S. presidential election to be held on November 3 is also a major turning point for the exchange market. Therefore, this time we will review the basic trends of each currency pair before the U.S. presidential election and prepare for it. The current basic trend in the forex market is “dollar weakness, euro strength, AUD strength, with a mild yen appreciation for USDJPY.” Watch to see whether that trend accelerates or reverses in the presidential election.

This article is a reprint and edit of FX攻略.com’s December 2020 issue. Please note that the market information stated in the main text differs from the current market.

Masakazu Sato Profile

Sato Masakazu. After working at a domestic bank, he joined the French Parisbas Bank (now BNP Paribas Bank). He has served as Interbank Chief Dealer, Head of Funds, Senior Manager, etc. Later, he became Senior Analyst at Forex Online, which boasted the No. 1 annual trading volume. He has been involved in the currency markets for more than 20 years. He also appears on Radio NIKKEI “Live Stock Market Commentary! Stock Channel,” Stock Voice “Market Wide – Foreign Exchange Information,” and regularly distributes market information on Yahoo! Finance.

USDJPY currently in a “mild yen appreciation” trend. Be mindful of three scenarios after the election

With the U.S. presidential election on November 3 expected to favor Democratic candidate Biden, Trump’s comeback is possible, and the results are about to be announced. In a tight race, there is also a possibility of emergency situations such as “Trump refusing to concede and the United States slipping into civil unrest.” If that happens, it could become a second “black swan” after the coronavirus, causing rapid dollar weakness and yen appreciation and a steep stock market crash.

Before the election, which has a profound impact on forex and financial markets, it is wise to reduce existing positions and observe price movements for about a week, then ride the trend in the direction it shows.

If Trump is re-elected, a short-term dollar appreciation and stock rally may continue, following the celebratory market pattern of his first win.

Even if Biden is elected, a relaxation of U.S.-China tensions could lead to a celebratory rally in stocks and the dollar. However, Biden’s main reason for election is nothing more than “not Trump.” He has proposed tax increases for corporations, among other measures, so his victory may be met with a market that’s not overly enthusiastic. Until we know who Biden appoints as Treasury Secretary and what financial policies he aims for, the current stalemate in the markets is likely to continue.

If the election results are close and Trump refuses to concede, the dollar could fall broadly, potentially below 100 yen per dollar. In that case, the currency that is most likely to surge would be one of the two options considered as global capital havens: the euro. Naturally, gold prices would also rise.

Based on these three scenarios, it is very important to assess the trend direction by watching the actual election results and the subsequent forex and stock market reactions.

Since the results of the election have not been determined this time, let us consider another factor that has a major impact on the forex market: the monetary policy of the U.S. Federal Reserve (Fed).