06.01.202112:24 Forex Analysis & Reviews: EUR/USD. Senate election in Georgia continues

Today, the focus of dollar pair traders is not on macroeconomic reports, or even coronavirus reports, but on the 10-million state in the Southeast United States, where local residents elect Senate representatives. In fact, Georgia's residents have already made their choice – the votes of American voters are currently being counted. This process is exciting, because a) The rivals go side by side; b) The Upper House of Congress is at stake. Given the importance of this event, all other fundamental factors faded into the background – at least for the dollar pairs included in the major group.

The news flow about the preliminary election results is controversial. During the Asian session, it was reported that Republicans defended the Senate – according to The New York Times, Republican candidate Kelly Loeffler won 51% of the vote, while Democrat Raphael Warnock received the support of 48% of voters. In another pair of rivals, Republican David Perdue allegedly beat Democratic representative Jon Ossoff by 1.2%. The market calmly reacted to this news, since Georgia is considered one of the base states of the Republicans – representatives of the Democratic Party have not won here for decades.

As a result, the US dollar index showed a slight increase, but did not even exceed the 90th mark. In other words, if the situation will not change, the main dollar pairs would have been trading in the same mode, in line with the previous day.

However, the balance of power changed during the start of the European session. Many American publications, citing their sources, announced sensational news: the Democrats suddenly took the lead. Looking ahead, it is noteworthy that if this information is officially confirmed, and Ossoff and Warnock retain their leadership, Republicans and Democrats will each have 50 votes in the Upper House of Congress. In this case, Kamala Harris, the US Vice President-elect who belongs to the Democratic party, will get the decisive vote.

If this happens, it is likely that Democratic representatives will receive full power, who will control the majority not only in the House of Representatives, but also in the Senate. Moreover, the party has a Democrat president who will be able to implement structural reforms that require the approval of legislators. It should be noted that the approval of congressmen is necessary not only for the approval of laws, but also for key personnel appointments. Therefore, the senate election in Georgia is very important for both Democrats and Republicans. But if the former wins, they will receive a kind of huge power control, while the latter will no longer be able to negotiate with the White House using leverage in the form of blocking bills.

98% of the ballots have been processed at the moment. Fox News reported that Democrat Ossoff is ahead of Republican David Perdue (who is the current Senator) by 3,560 votes – this is only 0.08% in percentage terms. In the other pair of opponents, the gap is more significant. Incumbent Republican Senator Kelly Loeffler is behind Warnock by 40,575 votes or 1%. Most American analysts believe that the representative of the Democratic Party has already secured a victory in this pair.

In any case, the "all or nothing" principle is applied here: Democrats need the victory of both candidates, so the main attention of traders is now focused on a pair of rivals Ossoff - Perdue. As mentioned above, the gap between them is 0.08%. This is also an important point in the context of further events, since the loser will be able to demand a recount if the final difference between the candidates is less than 0.5%.

It can be said that the situation is still unclear, and the advantage of the Democrats is minimal. However, the market already considered the headlines, which reported the victory of the Democratic camp a few hours ago. Amid such news flow, the US dollar index collapsed below the 89th mark: the last time it was at such lows was exactly three years ago, in January 2018. The main dollar pairs reacted accordingly: in particular, the EUR/USD pair surged to the support level of 1.2350 (upper line of the BB indicator on the daily chart), but could not impulsively break through it.

In my opinion, it is risky to trade the euro/dollar pair as well as other dollar pairs (with the exception of AUD/USD - where the Australian has individual reasons for growth) today, since things may change in favor of the Republican at the end of the day. Moreover, given the fact that the EUR/USD buyers already celebrated the Democrats' victory earlier, a large-scale corrective pullback can be expected. Therefore, it is better not to currently risk it, although the buyers of the pair will most likely approach the limits of 1.24 mark if the preliminary results are confirmed.