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Uncertainty Around The US Election

The main take-away from the US election day is that the Democratic nominee Biden is edging closer to the victory even if the jury is still out there as votes continue to be counted. What really matters though is what going on beneath the surface as Trump's team has initiated varies lawsuits to contest some of the results in key swing states.

Let’s get started…

Scan Of The Markets

To see an expanded version, right-click and select ‘open link in new tab‘. The indices show the performance of a currency vs a G8 FX basket. 

The main take-away from the US election day is that the Democratic nominee Biden is edging closer to the victory even if it’s not over until it’s over with votes still being counted. What really matters though is what going on beneath the surface as Trump’s team has initiated varies lawsuits to re-count some of the results in key swing states.

At this point, what we know is that an increasing number of TV networks are projecting Biden as the ultimate winner of the Presidential race. The democratic representative needs 270 electorate college votes and he is just a handful shy to get there. What’s going to be a nail-biter and will likely drag the uncertainty for weeks is the fact that Trump is determined to fight tooth and nail in what’s arguably the key phase which includes challenging the entire legal and electoral system. Is the market underestimating this risk?

Judging by the action we’ve seen in the likes of US stocks, where the Nasdaq index is up over 5% and the S&P 500 half that sum, there is definitely a firm degree of confidence. This happens even if the fundamental backdrop of a Biden victory with a Republican-controlled Senate would make the next term an era not characterized by as much fiscal stimulus as initially thought given the gridlocks to be expected.

What’s most interesting is to see stocks recovering its footing in style despite the battle that is about to unfold by re-counting votes in key swing states such as Michigan or Pennsylvania. If we assume as true that markets don’t like uncertainty, the rise in the likes of equities or the commodity-linked currencies means that the market is still holding onto the hopes of Trump retrieving the Presidency or perhaps the market just thinks that the opposition to Biden’s tax rises somehow offsets the lack of a big fiscal stimulus?

The above are obviously just suppositions that as a trader helps you stay in tune with the ongoing narratives at play. However, as I always stress, what really matters is what price action is telling us and how the right interpretation in the psychology of money flows can translate into potential opportunities to make money, even in such an unpredictable and volatile day as the US election outcome was. To prove this point, I’d like to highlight as part of the hot trade of the day a 4-hour Trap pattern setup available in the AUD/USD.

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Hot Trade Of The Day

To see an expanded version, right-click and select ‘open link in new tab‘. In this section I pick a market or several ones that presented an opportunity to buy on weakness or sell on strength based on the higher timeframes outlook. My video analysis below will further elaborate on the logic behind the trade.   

 

Insights – Hot Trade Of The Day

In this video analysis I dissect the information above. Ultimately, it is the traders’ call, via a set of entries thoroughly backtested, to enter and manage a position, hence the video is intended as educational in nature and not financial advice. 

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Recent Economic Indicators & Events Ahead

 

Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!

Important Footnotes

MARKET STRUCTURES

Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to this video. Fractal breakouts is at the epicenter to assist us in the analysis of chart structures.

MARKET MOMENTUM 

In order to assess the market momentum of a particular asset, I’ve promoted for years the idea of using what I call the smart money tracker. The settings and the indicator can be obtained via our Discord room, where traders from all walks of life interact frequently. In this video I lay out the elements I look into to call trend directions.

PROJECTION TARGETS

The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection

About the author

Ivan Delgado

Ivan Delgado is a decade-long Forex Trader. Feel free to follow Ivan on Youtube. Join thousands of traders who follow Ivan's insights to increase their profitability rate by learning the ins and outs of how to read and trade financial markets. Ivan has you covered with in-depth technical market analysis to help you turn the corner.