How the U.S. elections uncertainty will impact the Forex market (part I)

Uncertainty leads to high volatility. This centuries-old rule works perfectly in modern markets despite all of the technological breakthroughs, artificial intelligence, etc. The first day after the US elections impacted gaps on several major assets in the Forex market. The directionless and nervous price action was seen in the US dollar index measuring the greenback’s strength versus the volume-weighted basket of six major currencies as well. At the time of writing (10:40 AM GMT), EUR/USD was losing -0.2% of its exchange rate, GBP/USD was easing by -0.80%, while the rest of the majors followed the same direction with an approximately similar trading range. 

The capital flow to the greenback happens when traders and investors are not ready to impose too much risk in their portfolios, so they rush back to safety. Besides, the US 10-year Treasuries yield was plunging -13%, confirming the higher-than-average demand for safe-haven bonds. Therefore, the greenback was strong across the board on Wednesday.

When looking at the 4-hourly chart setup above, the first thing which catches the eye is the bearish gap on Wednesday open. However, the greenback bulls reacted with immediate demand, pushing DXY much higher than the daily low. On top of that, the US dollar index kept gaining during the European trading session. 

What's interesting from a technical point of view, is that on the one hand, the H4 rate is well above both Ichimoku resistance curves - baseline and conversion line, while the leading span is confidently bullish. The lower band of the gap was limited by the bottom of the cloud, offering a brilliant enter opportunity for intraday traders. Bounce-by-trend patterns and extremely oversold conditions on both oscillators prompted reversal signals as well. The overall outlook tells me that the descending channel that held DXY in September - October this year, is already in the past. The longer-term ascending channel seems to come back in play with the current rate approaching the upper band of it. A possible breakout could impose the acceleration of the uptrend. 

In the short-term perspective, fast and sensitive oscillators such as Williams %R are overbought. That could influence a short-term retracement or a lack of further bullish momentum to drive the greenback higher. Slower oscillators like Stochastic RSI (which smoothes too much noise by the way) are on the way to turn bullish, breaking through the middle level. Technically speaking, the US dollar index should continue strengthening versus major currencies, so it would be a bit early to go long on such majors as EUR/USD, GBP/USD, AUD/USD.