Tell me who is good for the dollar and I’ll tell you who wins the election

Author: Adam Button | Category: News

Author: Adam Button

The charts often tell a story the news reporters miss.

At the moment, four key charts are pointing to US dollar strength.

The Dollar Index broke above the 200-day moving average and the 38.2% retracement of the Aug-Sept fall yesterday.

EUR/USD broke below the 200-day moving average and the October low yesterday.

USD/JPY has been in a steady uptrend and touched the highest level since April on Friday. The pair has pulled back this week but there are a number of reasons to expect strength.

Gold took a beating on Friday, falling $40 to the lowest since Sept 1. Gold is priced in US dollars, so USD strength implies gold weakness. The 61.8% retracement of the August breakout at $1670 is a crucial support level. A break points to $1600.

Analysts lean toward Romney as a better candidate for the US dollar but there are other possibilities as well.

First, any clear outcome would likely lead to a resolution of the fiscal cliff, which I expect will unleash a wave of investment that reflects the recent better tone of US data.

Alternatively, the US dollar strength could be pointing to a disputed election result that sparks a wave of risk aversion (although gold would probably rally in that scenario).

LON GMT
BJ HK+8
NY EST-5
TYO +9

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