US Presidential Election: Here Is How You Can Plan Trading In Forex MarketNovember 4th, 2016 by Aayush Jindal in Economic News, Fundamental Analysis, Market Analysis
US Presidential Election: Here Is How You Can Plan Trading In Forex Market (US Dollar, Japanese Yen and Others)
One of the most awaited events of this year is round the corner, as on 8th November 2016, the financial market and investors will be keeping a close watch on the 2016 presidential elections in the USA. In a few days, we will know the next president. There are two candidates – Hillary Clinton, who belongs to the Democratic Party, and Donald Trump, who belongs to the Republican Party.
Now, there were several events lately, which kept the investors and traders guessing the most likely winner. However, the main question is how the financial market, especially the Forex market, will react once the results are declared.
Let us try to understand a few key points, since both candidates differ in many areas, so the possible impact may be different.
Donald Trump as President
What if Donald Trump wins the presidential elections? The first thing that comes to mind when we hear Donald Trump is lack of political background, or we can say less experience compared with Hillary Clinton. Also, his brave decision making attitude puts many doubts in the mind of investors.
There is a fear in the market if he wins. Many experts believe that the global economy may not grow with a steady pace if he is elected. Although he has a good financial market knowledge, the market thinks different.
Whenever there is a doubt in investors mind, we witness weird reactions. The most crucial aspect are doubts and uncertainty, which creates nervousness. As a result, there can be a selloff in the equity markets. It may slowly give up the ground, and if bears step up the momentum, selloff may happen with high volumes and large moves.
What it means for the US dollar? As we all know it is considered as a safe haven, so we may witness a rally in the greenback. There can be nasty moves as well, and the market is slowly preparing for the same. If you are planning to trade, then it’s wise not to expose too much at the moment until the results are declared.
Hillary Clinton as President
Now, what if Hillary Clinton wins the presidential elections? She is somehow a clever player. She has a political background and is considered a patient listener to her advisors. The market looks at her as if she can take decisions and make moves that could help the global economy.
Many experts and polls have a constructive outlook if she wins. So, her winning the elections may be seen as the complete opposite of Donald Trump. Investors and traders have less doubts, which in turn means less uncertainty and nervousness.
So, if Hillary Clinton wins there is a possibility of a good buying interest in the equity market. A few trading firms believe there can be around 2-5% gains if she wins the elections.
However, the US Dollar may lose some ground in this case. The risk sentiment may be boosted, taking the currencies like the Euro, Aussie dollar and the New Zealand dollar higher.
What Polls Suggest?
There were many polls conducted recently, and a few people were surprised by the outcome. Due to the recent FBI investigation and revelation about Hillary Clinton’s use of a private email server, a few polls gave Donald Trump lead.
According to the recent poll conducted by the ABC News and the Washington Post, Donald Trump was one point ahead of Hillary Clinton. In another poll, Hillary Clinton is leading as of writing with 66.1% against Trump’s 33.1%.
— FiveThirtyEight (@FiveThirtyEight) November 3, 2016
Anything can happen, and that is the reason why traders need to stay on their toes all the time in order to act based on the outcome.
How Japanese Yen (JPY) May Trade?
We all know Japanese yen (JPY) is also a safe haven just like the US dollar. However, when there is uncertainty, the yen mostly outpaces the greenback.
Hence, there is a possibility of a decline in the USDJPY pair if Donald Trump wins. On the other hand, there can be a minor rise in USDJPY if Hillary Clinton wins the election.
What Gold May Do?
As we move close to 8th Nov 2016, Gold may continue to rise based on the safe haven status and the market sentiment. Post results, if Hillary wins, it may decline 2-3%. And, if Trump wins, Gold may continue to rally.
PS: This is only based on the market sentiment, and the actual market movement may be based on how the market reacts. There are many things lined up moving ahead, and the actual reaction in the market depends largely upon the market sentiment.
The bottom line is traders must use proper stop loss and prepare for any kind of surprise. It’s always wise to protect your account and equity ahead of such an important economic and trend changing events.
Trade safe, traders!