The US dollar gets a beating

Blue wave hammers US dollar

The US dollar was crushed overnight beneath the stampeding feet of the blue wave herd, stampeding back into the buy everything trade. Whether one believes the market has gone too far too soon is irrelevant, one must respect the momentum. Should the US elections today pass without incident, relatively, it is entirely reasonable to expect that the US dollar will fall once again. We should theoretically have a clearer picture by midday Singapore time.

The dollar index collapsed overnight, falling 0.61% to 93.55, having failed ahead of its 100-day moving average (DMA) at 94.20, for the fourth day running. The pro-cyclical were the big winners of the day. AUD/USD rose 1.50% to 0.7165, NZD/USD rose 1.0% to 0.6695, and USD/CAD fell 0.70% to 1.3165. Elsewhere though, the other major currencies also enjoyed strong performances, notably sterling which rose 1.0%.

Regional Asian currencies also outperformed overnight, although not to the same extent as the commodity bloc. Perhaps the strangest move was the massive rally by the AUD/USD, despite the Australian export ban by China story being out all night. If indeed this is the path China has chosen to take, I would be very hesitant about becoming too bullish on the AUD at these levels, whether Biden wins or not.

A Biden win should theoretically be positive for the Mexican peso and the Canadian dollar, and potentially damaging for sterling over the Brexit Irish question. Asian countries sitting astride the trade lanes of both China and the US also stand poised to outperform if the polls turn out to be correct, and Biden wins. That should lead to outperformance by the Korean won, the New Taiwan dollar, the Singapore dollar and possibly the Japanese yen.

Like equity markets, the morning will be a choppy one for currency markets, moving to the tune played by the incoming voting results. Discretion is the better part of valour in markets like this morning will be.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley