In other words, the greenback is conservatively priced and it leaves room for upside surprise in 2017.
According to Bloomberg the probability of a hike at the December Fed meeting is at 67.6%. I think it’s closer to 80%, considering the oil price rebound above $50 (and potentially higher, see chart below), and a Clinton win is almost warranted two weeks from election day. Higher oil prices may raise inflation expectations, hence incite the Fed to hike. Similarly a Clinton victory represent “business as usual” (unless democrats win the house..highly unlikely), and the fed will have no reason to delay.
Few stats about US elections:
- Polls show Clinton ahead > 80% (including online anonymous polls).
- Larry Sabato’s Crystal Ball (98% accuracy) is showing Clinton as a clear winner.
- 30% minorities, 70% whites. Trump needs to gather a proportion of white supporters never reached before to compensate the loss in minorities.
- 8 times out 9, when the outgoing president had an approval rate > 48%, the same party remained in power. Obama is > 50%.
On the weekly chart, the dollar index (DXY) broke out of the upper line of the triangle on strong momentum and should head towards the top of its 2 year range at 100 (equivalent to a EURUSD at 1.05). The mid-price between the past 52 week high/low (Ichimoku cloud) at 96.30 should act as major support (equivalent to a EURUSD at 1.1120).