US dollar index spikes as US elections signal to a close race

  • The US dollar index is rising as investors continue focusing on the US election.
  • Early results show that Joe Biden is winning but the race is closer than anticipated.
  • The index will be volatile today as the final tally arrive,

The US dollar index (DXY) is surging today as traders continue to focus on the US election. The index is up by 0.70%, making it its best day in months.

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US dollar index rises

US election results

The biggest mover for the dollar index today is on the US election. Indeed, the dollar has gained against all currencies that make up the DXY. It is up by 0.75% against the Swedish krona, 0.74% against the Canadian dollar, and 0.60% against the Japanese yen. It is also up by 0.50% against the Swiss franc, and 0.50% against the pound and euro.

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The surging greenback is mostly because the election results seem tighter than what most analysts were forecasting. As of this writing, Donald Trump has won only 111 electoral votes while Biden has won 209.

However, it is still early and results from key states like Florida, Texas, Pennsylvania, Michigan, North Carolina, Ohio, and Georgia are yet to be released. That is an indication that the final vote could go in either direction.

As I wrote yesterday, the dollar index was gaining because investors were already pricing-in a Biden victory as most polls were pointing. Today, it is gaining because the results are relatively tighter and the outcome could take more hours than usual.

Fed interest rate decision ahead

To be fair, the biggest focus among traders will be on the Federal Reserve, which will start its meeting today and deliver its outcome tomorrow. Analysts polled by Reuters expect that the bank will leave interest rates unchanged as it has done in the past few months.

They also hope that Jerome Powell and his team will leave their quantitative easing program intact and possibly plead with the elected officials to add more stimulus.

In addition to the Fed, investors are also focusing on the US employment numbers. Later today, ADP will release its tally for private payrolls. Economists polled by Reuters expect the data to show that the economy added more than 650k jobs.

These numbers will come a day ahead of the weekly jobless claims and two days before the official nonfarm payroll numbers. In these numbers, economists expect that the US unemployment rate dropped to 7.3% as the economy added more than 700k jobs.

US dollar index technical analysis

US dollar index
US dollar index technical chart

On the four-hour chart, we see that the dollar index has surged today. It is trading at $94, which is significantly higher than yesterday’s low of $93.10. The price is slightly below the 78.6% Fibonacci retracement level and above the 25-day and 50-day exponential moving averages. While this uptrend could remain, I expect that the index will be relatively volatile today. As such, keep an eye on the support and resistance levels of $95 and $93.0

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