US elections - Analysis of chosen instruments (6/10 – 12/10/2020)
There are only 3 weeks left until the election, but many voters have already voted in a postal way. Last week, there was a debate between the candidates for the post of Vice President, which did not have any significant impact on the markets. The key news is that Trump has recovered from the coronavirus and is no longer infectious, according to doctors. Markets have responded to this news with growth. The markets also received an impetus for growth under the influence of ongoing negotiations on another supportive economic stimulus.
The second presidential debate, due to take place this week, was canceled due to coronavirus. The next debate, which is likely to be the last, is scheduled for October 22.
Negotiations on the economic package
Although Trump canceled negotiations on the package at first, he then resumed them, probably in order to increase his chances of re-election. At this point, however, it seems that it does not matter if the package will be approved before or after the elections. Markets clearly expect the crucial support package to be approved no matter who wins the election. This optimism clearly overcomes fears of a potential tax increase that Joe Biden is planning to introduce if he wins.
Stock market growth is positive news for Trump.
Trump visited Florida
If Trump doesn't win in Florida, then it's almost certain Trump won't be president again. Trump is aware of this and therefore could not afford not to come to Florida. Florida is one of the countries that has been hit very hard by a coronavirus. More than 15,000 people died here on Covid-19. Nevertheless, many Trump supporters did not have a face mask at the meeting.
Referring to his recent coronavirus illness at an election rally, President Trump said: "They say I am immune and I feel so powerful. I'll walk in there and kiss everyone. I kiss the guys and beautiful women. I'll give you a big, fat kiss. "
Biden called Trump's behavior irresponsible. Biden will visit Florida this week and focus his campaign on the administrative issues of resolving the pandemic.
Election preferences as at October 12, 2020
As for the so-called popularity election, i.e. how many voters would vote for their candidate, compared to last week, Biden increased its leading to almost 10 %.
Figure 1: Survey of election preferences, source: https://ig.ft.com/us-election-2020/
We reiterate that what matters for the success in the US election is not the number of votes that a presidential candidate receives, but the countries in which he manages to win. In order for a candidate to become president, he must win the votes of at least 270 electors. If the candidate did not reach the required number of electors, then the President would be decided by Congress according to a special constitutional procedure.
The number of electors varies from state to state and depends on the population of that state. Therefore, it is necessary to recalculate the votes of people according to the state in which they will vote and then assign the candidates the number of electors obtained.
According to polls, Joe Biden would currently win 279 electors, which is the same number as last week, see Figure 2:
Figure 2: Conversion of peoples' votes according to preferences to electors, source: https://ig.ft.com/us-election-2020/
are the states in which this year's elections are very likely to be decided. In these states, none of the candidates currently has a certain victory. With a total of 134 electors at stake in these states, it can be said that even if Trump won in these states, it would not be enough for him to win the election overall, according to this survey.
Because the choices will affect the development of the coronavirus pandemic, Figure 3 shows the current development of coronavirus in the United States. It can be seen that the number of new cases has increased again in the last week.
Figure 3: Development of new cases of COVID-19 in the USA, source: https://www.worldometers.info/coronavirus/country/us/
Many Americans, fearful of the coronavirus infection, have already voted by correspondence, and the number of correspondence votes will continue to grow. Problems related to postal voting were described in the last article.
Technical analysis as at October 12, 2020
The moving averages used in the technical analysis are EMA 50 (orange line) and SMA 100 (blue line).
The SP 500 Stock Index
The index is moving in a growing trend and is currently approaching the level of resistance, where it is historical high, as shown in the chart in Figure 4.
Figure 4: The SP 500 on a daily chart
The situation on chart H4 then looks like this, see Figure 5.
Figure 5: The SP 500 on H4 chart
Here, it can be seen that the moving averages are in the bullish constellation as EMA 50 (orange line) is above SMA 100 (blue line). Points A and B forms double bottom supports, and the level around point C is the peak of the double bottom formation, which is the bullish signal. The resistance we highlighted last week was broken and it has now become a new support.
The price has free space to move to a resistance in the range of 3,580 - 3,590, where the historic all-time-high is.
Support 1 is located in the range of 3,415 - 3,427.
Support 2 is then in the range 3,337-3,343.
The significant level is especially 3,234, which was the opening price at the beginning of 2020.
Of course, the election result will also have an impact on the US dollar. That is why we present the current situation on the most popular currency pair the EURUSD. On a daily chart, this pair is in Figure 6:
Figure 6: The EURUSD on a daily chart
The EURUSD is moving in a rising trend and it strengthened slightly last week despite the growing cases of Covid-19 in Europe. Investors probably bet that Joe Biden will win the election. His election should bring geopolitical stability to the markets and therefore the dollar should weaken.
Resistance 1 is in the range 1.1930 - 1.2000
Support 1 is in the range around 1.1600 – 1.1620 (at the last low, from which the price turned upwards).
Support 2 is in the range of 1.1450 - 1.1500. Here, there is Fibo 61.8% and at the same time there is a break of previous resistance.
The EMA 50 moving average can also be used as support.
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