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US Elections: What Does the USD Data Suggest?

TraderMade’s chief technical analyst, Steve Jarvis, has put
out some interesting research looking at USD trading patterns around past
presidential elections to see if there is any indication of what to expect in
the upcoming one.

Using a USD trade weighted index chart for his analysis
rather than specific FX rates, Jarvis looked at how the USD moved during the
two months leading up to the previous seven US presidential elections and the
two months after.

Going back to 1988, Jarvis highlights who was elected, their
defeated opponent, and includes the percentage change for the USD index for the
two months before and after the election, as well as the net change over the
four-month period.

Given that the election always takes place on a Tuesday, two
months afterwards is always a Sunday, and therefore Jarvis uses the previous
Friday’s USD close, so it is actually just a couple of days short of two
months.

Here’s what he found: 

US Election results
and % changes for USD TWI for: A/ 2 months up to. B/ 2 months after. C/
combined 4 months.

06 Nov 2012 (57th).
Obama (D)
332. Romney (R) 206.  USD %
changes: 

06Sep-06Nov -0.74%.  07Nov-04Jan -0.16%.  06Sep-04Jan -0.90% 

04 Nov 2008 (56th).
Obama (D)
365. McCain (R) 173.   USD
% changes:

04Sep-04Nov +8.50%. 
05Nov-02Jan -3.86%.  04Sep-02Jan
+4.32%

02 Nov 2004 (55th).
Bush (R)
286. Kerry (D) 251.   USD %
changes: 

02Sep-02Nov -4.01%. 
03Nov-31Dec -5.28%.  02Sep-31Dec
-9.08% 

07 Nov 2000 (54th).
Bush (R
) 271. Gore (D) 266.   USD %
changes:

07Sep-07Nov +1.48%. 
08Nov-05Jan -6.26%.  07Sep-05Jan
-4.87%

05 Nov 1996 (53rd).
Clinton (D)
379. Dole (R) 159.   USD
% changes:

05Sep-05Nov +0.56%. 
06Nov-03Jan +1.96%.  05Sep-03Jan
+2.54%

03 Nov 1992 (52nd).
Clinton (D)
370. Bush (R) 168.   USD
% changes:

03Sep-03Nov +13.28%. 
04Nov-01Jan +4.30%.  03Sep-01Jan
+18.15%

08 Nov 1988 (51st).
Bush (R)
426. Dukakis (D) 111.  USD %
changes: 

08Sep-08Nov -3.37%. 
09Nov-06Jan -0.19%.  08Sep-06Jan
-3.55%

“During the two months leading up to the past seven
elections, the dollar has slightly more often risen than fallen.  So nothing out of the ordinary about the US dollar’s
relatively strong performance over the past five weeks. Historically though, it
tends to fall back after the election and over the past seven elections, it has
slightly more often than not been lower two months after the election than it
was two months ahead of the election,” notes Jarvis.

Looking specifically at the Democratic wins, of which there
were four in the data sample, it can be seen that in the two months leading up
to the election there were three rises (two significant and one small) and one
fall (small). 

In the two months after the election, the data shows that
there were two rises (one moderate, one small) and two falls (one moderate and
one small).

For the entire four-month periods at each election, there
were three rises in the USD (one significant and two moderate) and one fall
(small).

“On the past four Democrat election victories, the US dollar
has tended to be firm in the two months leading up to the election, with the
post-election period not following a clear pattern, although it has tended to
end up higher two months after the election than it was two months beforehand,”
notes Jarvis.

Looking at the Republican wins, of which there were three in
the data sample, in the two months leading up to the election there was one
rise in the value of the USD (small) and two falls (moderate).

In the two months after the election, the data shows that
there were no rises and three falls (two moderate and one small).

Overall, for the four-month periods around each election,
there were three falls (one significant and two moderate).

“On the past three Republican election victories, the US dollar
has fallen more often than it has risen in the two months leading up to
election day, and on all three occasions has then fallen in the two-month
period following the election, to end lower than it was two months ahead of the
election,” observes Jarvis. 

His conclusion from this data? 

“On balance, if the recent rise in the US dollar is
sustained, it is more consistent with an upcoming Democrat election victory
than a Republican one. But note, we are using such a small sample sizes, so
there will be a significant margin of error,” says Jarvis.

 

galen@profit-loss.com

@Galen_Stops

@Profit_and_Loss

 

Galen Stops

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