Free Profitable Forex Newsletter
Hey! This is Philip with the Monday trade idea of the Free Profitable Forex Newsletter!
Trading the US midterm elections Long EURUSD or Long USDJPY
This week all the focus is on the US midterm elections for Congress which is also expected to affect the currency market to a certain extent, at least in the short-term if not materially in the longer-term.
Polls have been suggesting that the most probable scenario is for the Democrats to take control of the house and
Republicans to keep the Senate. This scenario is expected to be negative for the Dollar as losing the House for the President Trump will mean that he will have more difficulties to implement his pro-growth and "America first" policies.
But polls have been previously wrong and given the close results in the polls, the elections can easily swing either way. Most importantly, for the Forex market and the Us Dollar, there are 3 main scenarios that are
expected.
- Negative for USD - A hung Congress (Democrats and Republicans win one chamber each)
- Strongly negative for USD - Democrats take both House and Senate
- Strongly positive for USD - Republicans keep both House and Senate
Based on the above, we can search for potential trading opportunities once the
results of the elections start coming in and there is enough information to show which scenario of the above 3 will become a reality.
Basically, we should be looking to sell the Dollar in the first two scenarios and buy the Greenback in the third scenario. The best way to express USD negativity in the first 2 scenarios is likely to be through a long EURUSD position, while the best way to express USD bullishness (for the third scenario) is likely to be through a long
USDJPY position.
Hence, we are looking at the 2 potential trading opportunities below:
Long EURUSD in the first two scenarios: - EURUSD likely to rally above 1.1500 in this scenario. Technically, it would find resistance in the 1.1570 - 1.1600 zone and these would be appropriate levels to target with long positions.
- EURUSD
technically needs a break above 1.1400 before things shift to the bullish side, hence levels below 1.1400 can be used for stops in the first 2 scenarios.
Or, long USDJPY in the third scenario: - USDJPY would probably rally strongly in the third scenario as risk appetite will likely take over on a full Trump-Republican win. The 114.50 area is distinct resistance in this pair, and hence
would likely be reached under this scenario.
- Technically, 112.50 is minor support in USDJPY, but it should hold in the third scenario if USDJPY is really going to react bullishly and move higher. Hence looking for levels below 112.50 to place stops should be appropriate.
As always, keep in mind that currency exchange rate movements after elections can be highly unpredictable. The above 3 scenarios are the most likely reactions of the Dollar to the 3 possible outcomes, but that is not a guarantee that it will indeed play out in that way.
Markets may begin to speculate about the possible
outcome before any results are published and that may cause significant moves in Fx pairs. But, in these kinds of situations, it's usually best to ignore those pre-election speculative moves and wait for clarity before taking any positions.
Trade signals from the past week (FREE + FULL paid newsletter)
- October 22, 2018 – Short EURJPY from 128.15, stop hit at 128.50 = -35 pips
- Another trade is in profit and remains open (we can’t disclose it until it’s closed) (featured in full newsletter)
TOTAL: -35
pips in the past week
TOTAL: +498 pips profit since the beginning of October
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Any opinions, news, research,
predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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