KEY POINTS OF THE ARTICLE:

• Nuanced reaction of the dollar pending a final result
• The dollar index moves within a triangle

NUANCED REACTION OF THE DOLLAR PENDING A FINAL RESULT

Following the hotly contested US election, the dollar index fell on Wednesday by -0.139 (-0.15%).

On Wednesday, the dollar index fell to a one-week low, while it had hit a five-week high due to volatility following the vote. A sharp rise in U.S. stock indexes on Wednesday reduced the demand for liquidity for the dollar. The dollar has also been weakened by the narrowing of interest rate spreads. Bond yields have fallen as the big Democratic stimulus bill will struggle to be implemented if the election results confirm that Republicans will retain control of the Senate.

On Wednesday, the EUR/USD recovered from a more than 3-month low and posted modest gains after the dollar weakened. EUR/USD initially fell to a 3-3/4 month low following ECB comments and a fall in German bond yields. USD/JPY fell after a two-week high as the uncertain outcome of the US presidential election triggered the purchase of yen as a safe haven.

Wednesday's U.S. economic data was negative for the dollar after October ADP employment rose only +365,000, much weaker than expectations of +643,000. In addition, the October ISM Services Index fell from -1.2 to 56.5, lower than expectations of -0.3 to 57.5.

The yield on 10-year bonds initially climbed to a more than 4-month high of 0.944%, due to pre-election rumors of a "blue wave" that would have increased the chances of a stimulus package. However, 10-year bonds eventually fell 13.9 points to 0.760% after Tuesday's election results suggested congress would remain divided, reducing the chances for U.S. lawmakers to pass a major stimulus package.

THE DOLLAR INDEX MOVES WITHIN A TRIANGLE

The dollar index touched yesterday a high at 94.30 which now serves as resistance and which is also the passage of a descending oblique. The index is on its way back to an ascending oblique reinforced by a horizontal support at 92.60.

The two obliques form a triangle whose output will give the signal of a next important movement. In the meantime, this consolidation between the two terminals can continue.

Evolution of the dollar index in 4H data: