The Day For U.S. Elections is Finally Here; Stock Market Added More Than 2%

The forex market is trading very calm ahead of the U.S. elections as the traders have mixed emotions for the result and are trying to reduce the risk of their portfolios. On the other hand, the stock market has already started to reflect the political event, recording massive gains.

Multiple scenarios are coming out, with the most prevalent the scenario of a stock market crash if Donald Trump is the next U.S. President, while the scenario suggests that stocks will soar if Hilary Clinton becomes the first woman president of the United States.

In either way, it’s notable that the decision of FBI to exonerate Clinton for handling the emails as secretary of state triggered a boost in the market. The U.S. Dollar index picked up nearly 0.5%, USD/JPY shored up 0.30% while Gold fell 0.54% due to dollar strength. Meanwhile, the U.S. indices also bolstered importantly, with Dow Jones rising +371.32 points up, or 2.08%, Nasdaq +119.8 points higher or 2.37% and S&P 500 2.22%, +46.34 points.

However, the risk sentiment remains high in Wall Street, therefore, we suggest you, to be extremely cautious ahead of the U.S. elections, a historical event which is expected to provide high volatility in the market. Remember that you should never invest money you cannot afford to lose.

The latest polls show that Clinton is first in the race with a percentage of 47.2% to win while Trump is not far behind with 44.2% of the population. The first results of the U.S. presidential contest between Hilary Clinton and Donald Trump are expected to begin coming out in mid-morning Wednesday, during the Asian session.

British Pound and Euro Remain Subdued

On other news, the British pound is trading in a weaker footing against its major peers amid the political uncertainty over Brexit. Last week, the British High Court had ruled that Article 50 could not be invoked without Parliamentary approval. Later in the day, the manufacturing and industrial production indicators for September, Inflation Report Hearings and NIESR GDP estimate for the three months to October are coming out.

In Euro area, we do not expect any significant news to drive the market today. The single currency was traded subdued on Monday and early Tuesday, while the retail sales, for the whole union, released yesterday, were not enough to determine the currency’s direction. The retail sales picked up 1.1% in September compared with the year before, slightly below market’s expectations of 1.3%. In comparison with the month before, the pace of retail sales slowed down 0.2% retaining August’s reading.

EUR/USD – Technical Outlook

The world’s most traded currency is trading modestly flat at 1.1044 and challenged the 1.1027 in the previous hours. The bears take a breath from yesterday’s sell-off and prompt for a further downside move in the EUR/USD pair, as the U.S. dollar awaits the results of the U.S. elections later today.

Following the strong rebound on the 1.1140 resistance level, the pair fell more than 0.8% over the last two days and met the 50-SMA on the 4-hour chart. Our expectation is a bearish movement, if there is a penetration of the 1.1027 support level until the 1.0935 barrier. Otherwise, if the price has a successful attempt of the descending trend line and the 1.1140 strong obstacle, it will open the way for the 1.1200 psychological level and the 1.1280 handle. Moreover, the RSI indicator is moving south, near the 50 level. We are in the final stretch of the U.S. election and the volatility will be increased later in the U.S. session.

GBP/USD – Technical Outlook

The GBP/USD pair failed to surpass the 1.2557 resistance level and recorded the first negative day following eight green candles in a row. The cable plunged more than 0.9% since yesterday and is moving towards the 1.2330 – 1.2270 significant support zone which overlaps with the 50 and 100 SMAs on the 4-hour chart. The pair slipped below the 200-SMA on the same chart endorsing the bearish attitude on price while the technical indicators remain near the neutral area. The MACD oscillator is falling whilst still lies in a positive territory, below its trigger line. Also, the RSI indicator is flattening slightly above the 50 level. However, the main risk event for today remains the U.S. presidential election so traders must be more careful with their trades.

S&P 500 – Technical Outlook

The S&P 500 surged more than 2.2% in this week and posted its biggest rally to the upside over the last couple of months. Stocks gapped higher at the Asian open and continued to trade strongly through the session after its longest sell-off in more than 10 months.

From a technical point of view, the stock index surpassed the 200-daily SMA and is approaching the other two SMAs which are near the 2150 - 2155 resistance zone. The price needs to go through the 200-SMA on the short-term timeframe which coincides with the 2140 resistance barrier. In addition, technical indicators, on the 4-hour chart, are biased higher after entering the positive territory. The MACD oscillator is moving above both, its zero and trigger lines suggesting a stronger index in the next few days. The Relative Strength Index (RSI) is following an upward path above 50, confirming the recent bullish attitude of the price while it is flattening slightly below the overbought area.

Dow Jones – Technical Outlook

Dow Jones Industrial Average returned above 18050 with a gap to the upside after the sharp sell-off that dropped the index at the 17880 support level. The index climbed 2.16%, +240 points up and reached the 18290 resistance barrier following the pullback from the 18050 support barrier. Currently, the index is developing above the 50-daily SMA and is approaching the last record high posted one month ago near 18290. A penetration to the upside of the latter level will expose the price until the 18405 strong handle. Otherwise, if the index slips below the 18050 level, it will meet the next level at 17950. 

The technical structure suggests further upside momentum since both are moving near the overbought area. The MACD oscillator holds above its trigger and zero lines, while the RSI indicator is flattening below the 70 level. Also, the volatility increases as the U.S. elections are about to end, so traders must be cautious.

What to watch today

Today, all the eyes will be on the U.S. Presidential elections and USD traders will hang on every new information coming from the media. In other news, UK’s industrial and manufacturing production for September are coming out while the Inflation report hearings will be published. The NIESR GDP estimate for the three months to October is also scheduled for release later in the day.

In U.S., the NFIB business optimism index for October is coming out and Fed’s Charles Evans has two press conferences scheduled. Traders will not pay attention in any of these, as the politics will completely overshadow the economics for the day. Overnight, Chinese inflation rate is coming out and is expected to grow at 2.1% in October compared to the year before. In contrast, the month-over-month figure is forecasted to show that consumer prices remained flat in October from a rise of 0.7% in September.