Even though President Trump’s name is not officially on the ballot, there can be no doubt that this is a referendum on his politics, as Trump and his presidency have been the dominant topic of most campaign races.
Republicans are well positioned in the battle for the Senate though as only nine of their seats are up for election, while Democrats are defending 24 of theirs and two independents who vote with them are also up. Polls suggest that the Republicans will keep a majority in the Senate, while the Democrats may take the House of Representatives. If the Democrats do win the House, their main focus will be to lay the groundwork for the 2020 election, when the party hopes to win back the presidency as well as the majority in the Senate.
If Democrats win control of one or both of those houses, they’ll be able to limit how much President Trump can achieve in the final two years of his term. We do not expect any change in trade policies or an infrastructure program, but the Democrats may attempt to use the control they gain over House committees to launch oversight investigations into several issues, including the president’s business dealings.
The USD could weaken somewhat in the event of a Democrat victory in the House. We should also expect stronger commodity currencies (CAD), especially those related to the Chinese economy (AUD, NZD) and weaker safe-haven currencies (JPY, CHF).
Trading strategy:
AUD/USD
Trading strategy: Long
Open: 0.7190
Target: 0.7420
Stop-loss: 0.7120
Recommended size: 1.50 mini lots per $10,000 in your account
Short analysis: Bull signals increase as October’s high, the 2018 down trend line and 55-DMA get cleared. RSIs are biased up but the daily is near overbought and the daily cloud base is nearby. We remain long. In our opinion the AUD will gain the most after U.S. midterm elections.
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