Foreign exchange traders are closely watching the dollar trade in highly volatile markets today as they weigh the potential effects of the “Trump Trade” on markets. The dollar has been strengthening significantly when a Trump victory appears more likely, as U.S. Treasury yields price in a more inflationary outlook for the U.S., particularly if Republicans gain full control of the government.
The Dollar Index (DXY) has experienced a volatile session, with notable gaps at the open, and traders expect these conditions to become even more pronounced as the results session approaches, scheduled for the Asian time zone on Wednesday. In general, the dollar is likely to find support on dips regardless of which party gains the upper hand. However, in the short term, the market may pressure the dollar if Democrats take the lead, while a Republican resurgence would likely drive buying interest.
The DXY opened today at 103.95, having closed slightly above the 104.30 level following news that Kamala Harris had taken the lead in the polls over the weekend. However, betting markets still show Trump as the favorite, making the race exceptionally close. The DXY offers traders an effective way to hedge election-related exposure as the market continues to fluctuate significantly. Short-term support lies near today’s low around 103.60, with longer-term support around 100.50, while resistance is seen at Friday’s close, followed by October’s highs.
Resistance Levels:
- Resistance 2: 104.63 – October High
- Resistance 1: 104.32 – Friday Close
Support Levels:
- Support 1: 103.60 – Daily Low
- Support 2: 100.50 – Trendline Support
