This is the direction the dollar will take if Joe Biden wins.

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A victory of Joe Biden in the elections could lead to a devaluation of the dollar in the next years
Economist Stephen Roach forecasts a 35% decline in the dollar by the end of 2021
The dollar could eventually drop to a multi-year low of $88.30 at $88.30, which would translate into $1.25 for EUR/USD

The dollar is likely to begin a bearish cycle if Democratic candidate Joe Biden wins next month’s election, analysts believe.

Fundamental analysis: Dollar remains vulnerable

The US dollar remains vulnerable to a “significant depreciation” as the fundamental aspect of the market points to a deeper retreat, warns Eric Robertsen of Standard Chartered.

“You have the twin deficit in the US, which is getting worse and worse, you have the worst trade balance in 15 years,” Robertsen said.

In his opinion, the outcome of next month’s elections is likely to determine the dollar’s path for the next few years. A victory for Democratic candidate Joe Biden could eventually lead to a devaluation of the dollar in the coming years.

For weeks analysts have been arguing that the dollar could get into trouble if Biden wins. On the other hand, Donald Trump’s could make the price action “a little messy in the short term,” according to Robertsen.

“If you were to see a reversal of this trend – either because of world trade or because of a change in the United States’ domestic economic agenda – and coupled with the fact that the US no longer has an interest rate advantage over its G-10 competitors, I think you could make a very compelling case for a multi-year dollar devaluation,” he said.

Robertsen’s comments are confirmed by economist Stephen Roach, who believes the dollar could experience a sharp decline in 2021. He predicts that the dollar will fall 35% by the end of 2021.

Technical analysis: multi-year lows in sight

The Dollar Index (DXY) closed the week over 1% lower, marking the largest weekly losses since July. Investors are increasingly confident that Biden is likely to win elections, which will add to the pressure on the dollar.

The Dollar Index Weekly Chart (TradingView)

Biden’s victory could push the dollar below the August low towards April 2018 at $91.70, with $91 being the first major target on the downside. Still, the $92 move should provide significant support for the bulls.

A more extreme scenario assumes a downward movement to multi-year lows at $88.30, which would translate into $1.25 for the EUR/USD. Click here to compare the best Forex brokers with free demo accounts.

Summary

Analysts believe that Joe Biden’s victory in next month’s election could leave the US dollar significantly vulnerable in the coming years.

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