On November 5, 2024, Americans will vote for their next president, who will serve a four-year term starting in January 2025. The main contenders are Republican nominee Donald Trump, with running mate Senator JD Vance, and Democrat Kamala Harris, who stepped in as a candidate after President Joe Biden chose not to run; her running mate is Minnesota Governor Tim Walz. In the U.S. presidential election, voters cast ballots not just to choose the popular vote winner but to help determine electoral college votes. Each state has a set number of these votes, with the first candidate to reach 270 out of 538 winning the presidency. Most states follow a winner-takes-all system, making swing states critical as they can sway the final result.
Voters will also select members of Congress, including all 435 seats in the House of Representatives and 34 Senate seats. The current split gives Republicans control of the House, while Democrats lead the Senate. The outcome will shape the legislative balance of power, impacting policy and potentially checking the president’s agenda if opposing parties hold sway.
We have already looked at the moves in the S&P500 here over the US election. See article on this page. Here we look at the USD moves. With markets anticipating a Trump victory as a protectionist move for the US further USD strength could well be the result of a Trump victory. Seasonally, the USD has gained 4 out of the last 6 elections in the US going back 25 years. We saw USD gains in the 2016, 2012, 2008, and 200 elections with average gains of 0.87%. So, could this make pairs like the GBPUSD or EURUSD attractive sells on the US election night? While winners are typically known on election night, it could take days to finalize the count. The elected president will be inaugurated in January, marking the official start of the new administration.
Technically, the DXY has key levels at 104.50 and 106. Expect these to be key reference points (support/resistance levels) over the US election release.
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Trade risks
The movement of major instruments over elections can produce significant surprises as huge position changes are often underway. Be particularly aware that the risks around currency trading and elections can be extremely high and elevated. Some traders prefer to use options market for currency plays due to the volatility in the spot market.
Don’t just trade it—Seasonax it!
