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- In this webinar, we used price action to look at macro markets after the U.S. Presidential election.
- The initial reaction to the Presidential election was aggressive risk aversion as Donald Trump pulled ahead in the polls. This was very much against what much of the world was expecting, and the general response of risk aversion was likely a manifestation of that shock factor. But at around midnight on election night, support came-in to both the U.S. Dollar and the S&P 500 – and prices have continued to run higher ever since. To read more around the reversal, please check out our Market Talk article from Tuesday entitled, Price Action Setups Ahead of the U.S. Presidential Election.
- We discussed the possible rationale behind the reaction with the aim of discerning continuation potential. The likely driver here is probably going to remain the Federal Reserve. The prospect of a Donald Trump presidency brings with it the chance to actually see fiscal stimulus measures coming-in to replace the monetary stimulus that has been used by the Fed to keep markets running-higher. To read more about the prospect of continuation of these trends, please check out our Market Talk article from this morning entitled, Trump Bump Drives Global ‘Risk On’ Trade.
- The post-election reaction has seen a reversal of USD/S&P weakness into USD/S&P strength. On Tuesday, we looked at this scenario and said that it’s unlikely that both of these themes will continue, and that is still the case today. If the Fed does hike rates in December, we’re likely looking at some element of a stronger Dollar with an element of chop or perhaps even weakness in stock prices. If the Fed does not hike, then we’re likely looking at pressure in the Greenback to go along with higher stock prices.
--- Written by James Stanley, Analyst for DailyFX.com
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