USD/CHF Feels the Weight of US Midterms, USD/CAD Clings to Support

The US midterm elections could spark volatility across currency markets, particularly if Republicans outperform expectations. With Treasury yields and risk sentiment likely to influence the dollar's response, USD/CHF looks vulnerable to further losses while USD/CAD clings to a potentially significant support zone.

View related analysis:

US Midterms Put the Dollar on Edge as USD/CHF and USD/CAD Test Support

US Midterms Could Stir FX Volatility

The US midterm elections could inject volatility into currency markets this week, with prediction markets assigning around a 70% probability to Democrats taking control of both the House and Senate. Such a result could constrain President Trump's fiscal agenda and weigh on US Treasury yields, potentially undermining the dollar.

However, with a Democratic sweep already widely anticipated, Republican outperformance presents the greater risk of a market surprise. Risk sentiment will also matter, as election-related uncertainty could favour defensive currencies such as CHF, while weighing on risk-sensitive currencies such as AUD and CAD.

Yet implied volatility remains relatively contained ahead of the elections, with expected daily ranges below their 20-day averages for five of the seven major currencies shown. This suggests options markets are not pricing in an outsized move despite the potential for an election surprise.

Source: LSEG

Three Election Outcomes and Their Impact on USD

Democratic sweep (around 70%): Potentially USD-negative through fiscal gridlock and lower yields, although much is priced in. A negative equity reaction could complicate the FX response.

Democratic House, Republican Senate (around 26%): A meaningful surprise, but still produces divided government. The USD response could therefore be relatively muted.
Republican sweep (roughly 6%): The largest surprise, with potential for higher yields and a stronger USD through renewed fiscal expansion expectations.

US Midterm Elections: FX Volatility Roadmap

Election Night Timings for FX Traders

US midterm election results will begin emerging from 6 pm New York time on Tuesday, 3 November (10 am Sydney on Wednesday), with the main volatility window likely to be 7 pm–11 pm ET (11 am–3 pm AEDT).

This could make Wednesday's Asian session particularly volatile for FX traders as control of Congress becomes clearer. However, closely contested races could delay a definitive result beyond election night.

Senate Control and Treasury Yields in Focus

While prediction markets heavily favour Democrats winning the House, control of the Senate remains less certain and could drive the larger market surprises. Traders should also be wary of initial FX moves reversing as more votes are counted.

The reaction in US Treasury yields and equity markets will be critical in determining whether the dollar strengthens or weakens, particularly against CHF, AUD and CAD.

Volatility could extend into Thursday's Sydney session, with the US ADP employment report, ISM Services PMI and Treasury's quarterly refunding announcement providing additional catalysts.

USD/CHF Tests Critical Support Ahead of US Midterm Results

The weekly chart shows that USD/CHF remains within a bullish channel, though prices are retracing towards its lower boundary. Bears have made a minor attempt to break below the 100-week EMA ahead of the midterm results. A risk-off tone could see USD/CHF fall further, with the Swiss franc attracting safe-haven flows or lower Treasury yields weighing on the US dollar.

The daily chart shows USD/CHF struggling to hold above a high-volume node (HVN), having closed near the day's low. This could favour bears seeking to fade rallies within the range of the past four days, up to the monthly pivot point (0.8278).

However, given the proximity of the 100-week EMA and HVN, I am on guard for a bounce from current levels. A break beneath 0.8156 and the monthly S1 pivot (0.8162) is required for a clearer move towards 0.8100.

Source: ICE, TradingView

USD/CAD Tests 1.3940 Support as Bearish Momentum Fades

USD/CAD is back below 1.4000 after selling off for three consecutive weeks, though bearish momentum is waning. Last week's range was the smallest of the three bearish candles, forming an inverted hammer just above the 1.3940 high. While the midterms could send USD/CAD beneath this level, it remains an interesting support zone as it also coincides with the 200-day EMA.

The daily chart shows a bullish divergence on the RSI (2), with Monday's small bullish hammer respecting the 200-day EMA and 1.3940 high. A break above 1.4000 could see USD/CAD head towards the monthly pivot point around last week's high (1.4068), while a break beneath 1.3940 opens up a move towards 1.3900 and the monthly S1 pivot just below 1.3850.

Source: ICE, TradingView

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

FOREX.com is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment and CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.forex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.forex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 42.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.