Breakdown of the latest developments on the global exchanges
Oct 7, 2020, 2:24 PM GMT

Headstrong Trump, Threatened by Likely Defeat, Poses a Threat to the Tentative Recovery

President Trump Greets Supporters

Donald Trump's unilateral decision to break off the stimulus talks between Republicans and Democrats stunned both his allies and opponents, in a surprising move that is a likely precursor of what is yet to come ahead of the November Presidential elections in the states.

The highly controversial debate between the current President and Democratic forerunner Joe Biden left many unanswered questions, with the only more or less evident outcome being the widening of the gap between the two in the preliminary polls.

Trump's unexpected move from yesterday can, therefore, be interpreted as a desperate move to garner more support for himself, by adopting the role of a confident hardliner.

Donald Trump's Tweets From Yesterday

The tweets reveal that the President is quite confident in his ultimate victory in the upcoming elections; however, his overall promise for restarting the negotiations afterwards is entirely dependent on the final outcome of the election.

In a sense, he is using the stimulus package as a wild card to compel voters to rally behind him, so that he can win the elections and only then secure the funding.

He received immediate backlash from many commentators who repudiated the decision and called it a form of blackmail at a time when people desperately need the funds.

At any rate, the rising prospects of a defeat for Trump are bound to make the President even more volatile and unpredictable as November comes closer. His swift changes of tone and direction are likely thus to inflict even more pressure for the already strained markets.

The demand for safe-havens is likely to be bolstered in the coming days and weeks as a consequence of that, by investors looking to hedge against the extra unpredictability and uncertainty in the global capital markets.

Meanwhile, the rally of the greenback is currently being tested in the aftermath of Donald Trump's tweets.

As can be seen on the 4H chart below, the EURUSD pair broke out above the downwards sloping trend line yesterday, as the greenback suffered temporary disruptions.

The price action remains concentrated within the borders of the significant test area (in blue), which has the major resistance level at 1.18000 as its upper boundary.

A breakout above it would signify a more decisive bullish commitment in the market, while a reversal around it remains an open possibility.

EURUSD 4H Price Chart