- The US dollar index is under intense pressure ahead of the Georgia Senate election.
- The winner of the election will determine the balance of power in Washington during Biden’s term.
- A Democrats victory will mean more regulations, higher taxes, and more stimulus.
The US dollar index (DXY) is down for the second straight day as traders wait for the outcome of the Georgia runoff election. The index, which dropped by more than 9% last year, has dropped by 0.20% today. It is trading at $89.70, which is close to its April 2018 low.
Georgia Senate election
Georgian residents are voting today for their two senators today. This will be the most important Senatorial election in a long time because it will determine the composition of the senate. It will also determine the overall performance of Joe Biden, the incoming president.
Are you looking for fast-news, hot-tips and market analysis?
Sign-up for the Invezz newsletter, today.
If the Democratic side wins the two sides, it will give Joe Biden the majority that he needs to accomplish his agenda. This includes increasing taxes for companies and the wealthy, more liberal judges, stimulus, and regulations.
On the other hand, if one of the two Republicans wins, it will leave Mitch McConnel as the Senate Majority leader. Subsequently, he will have the power to table or ignore most of Biden’s policies. This will be a favourable outcome to some investors because it will protect some of Trump’s accomplishment, like tax cuts. In a note, analysts at ING said:
“While a possible Democratic victory could raise concerns about more regulation, this might be outweighed by expectations of larger fiscal stimulus and thus keep risk assets supported and the dollar weak over the coming months.”
Meanwhile, the dollar index is also falling even after the relatively strong economic numbers from the US. In a report yesterday, Markit said that US manufacturing sector continued to do well last month. The PMI increased to 57.1 from 56.5 in the previous month. This performance happened even as the country continued to deal with the new coronavirus cases.
The dollar is down by 0.17% against the euro, 0.40% against the Swedish krona, and 0.17% against the Japanese yen.
US dollar index technical outlook
The daily chart shows that the dollar index has been under intense pressure in recent months. Subsequently, it has moved below the 50-day weighted moving average and the blue descending trendline.
The stochastic oscillator and the Relative Strength Index (RSI) have moved slightly above the oversold level. Therefore, the index will possibly continue to decline in the near term. If it does, the next key level to watch is $89.00, which is an important psychological level. You can trade the DXY with one of these high leverage forex brokers.
Source link