..will the dollar rally significantly if Trump wins?
Trading politics is fun isn't it? Nope, it's garbage yet here we are. I don't give two stuffs what's being passed in the US, I don't care who is lobbying who, nor which Democrat or Republican is shouting loudest from the roof tops. It's all bullshit.
What I do care about, and what is most important to those of you reading these pages, is what will the dollar do after?
Has the dollar been selling off purely on this event or natural "sell the fact" after the FOMC? Is this the "bone" I spoke about the other day, that the market needs to get trading again?
Like with 99% of things in trading, we'll have to let the price action give us the answer. It looks pretty obvious that this event is the only show in town right now so we can expect the dollar to gain if Trump wins and drop if he fails. The real question though is what happens after? Will any rally last or will it be hit by rally sellers trading something else? Would any drop find willing buyers or will it be the icing on the cake for sellers to kick it lower?
Monetary policy should trump (pun intended) politics 9 times out of 10, so my view is that any rally won't last and the selling theme will continue, like it has after every hike so far.
We can all guess though so the price action will be my guide. If we are going to see a turning point in the bearish sentiment USDJPY will need to gain back the 111.60/80 area (possible on a Trump rally), and then gain and hold 111.90/112.00. If it takes back 112.50 then we can start thinking about a full reversal from these lows.
USDJPY H4 chart
Anything less than that and any rally will fall flat on its face, and that often leads to further downside. And if Trump fails here, 110.00 might be the least of the problems after.
