Stocks rally pauses in anticipation of the US midterm elections result

In anticipation of the results of the midterm elections in the US, global investors are preparing for a lower open on European markets on Wednesday while US stocks are coming off three straight days of gains and so possibly were due for a pause. Results from the elections are continuing to come in, with a divided political landscape being predicted as the most likely outcome.

It would seem that despite some light clawbacks this morning, the equities futures market has been responding well to the outcome as it develops, while the US Dollar Index has been underperforming.

The DYX index is testing lows of 109 last seen all the way back on September 20, although some support is already being noted on the four-hour chart. Other major currencies have caught their breath as a result of the pressure being exerted on the dollar.

Sterling currently purchases 1.154 US dollars after a strong session on Tuesday, signalling the possibility of a break above $1.16 on Wednesday if the US dollar continues to fall.

It has been a strong month for the euro against the greenback lately, with the currency gaining over 2.5% over the last seven days, breaking above parity. To keep it that way, the Euro bulls will be fighting hard.

The cryptocurrency market on Wednesday was jittery and attempting to find a floor, after a sharp and broad drawdown as nervous investors worried about the stability of exchange FTX led to a rush of withdrawals and ultimately to Binance's request to bail it out.

On Wednesday, Bitcoin, the largest cryptocurrency by market value, dropped 2% at $18,250, after a 10% plunge on Tuesday, which was the biggest decline the cryptocurrency has seen since mid-August. Since early Tuesday morning, ether, the second-largest cryptocurrency, has lost nearly 18% of its value.

The calendars for the European and UK markets are clear today, and while attention will barely be focused on the US economic calendar, the 30-year mortgage rate is something worth focusing on.

During the midterm elections, Democrats will be able to maintain their slim majority in the House and Senate, while Republicans will be able to take control of one or both chambers of the legislature. In this case, there would be a significant power shift in Washington and the possibility of gridlock.

As it stands, the outcome of the election could be the deciding factor in whether or not Democratic legislators can push President Biden's agenda through a hyperpartisan Congress, which could make all the difference for Biden this year.