The Canadian dollar has settled down after posting strong gains in the Monday and Tuesday sessions. In North American trade, USD/CAD is trading at 1.3138, up 0.07% on the day.
Blue wave gives way to political uncertainty
The currency markets have been in flux this week, as all eyes are fixated on the US presidential election. Many pundits projected a decisive victory for Joe Biden over Donald Trump, and there was growing anticipation that the election would result in a blue wave, meaning that the Democrats would capture the presidency, as well as both houses of Congress. This scenario remains possible, but here we are on Wednesday and the presidential race remains too close to call, while the Senate is in a dead heat between Republicans and Democrats. As for the House of Representatives, it remains under Democrat control, albeit with a reduced majority. The blue tidal wave has been replaced by the specter of recounts, appeals to the Supreme Court, and yet more divisiveness in an already deeply split nation.
The dizzying pace of events since Tuesday has caused significant moves on the currency markets. The Canadian dollar joined other commodity-based currencies, such as the Aussie and New Zealand dollar and posted sharp gains on Tuesday, in the euphoria of a Democratic sweep, buy-everything mood. However, the political uncertainty on Wednesday has seen USD/CAD climb around 1.5%, only to surrender all of these gains. If Biden does eke out a narrow victory, the US dollar could face a broad selloff, reigniting the Canadian dollar rally.
- USD/CAD tested resistance lines at 1.3234 and 1.3289 in the Asian session, before retreating to lower ground. Above, there is resistance at 1.3344
- We find support at 1.3084, followed by support at 1.3029
- USD/CAD tested the 50-day MA in the Asian session
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