Select Language

EUR/USD trades sideways with eyes on US presidential election

Breaking news

EUR/USD trades sideways with eyes on US presidential election

  • X
  • facebook
  • LINE
  • RSS

  • X
  • facebook
  • LINE
  • RSS
New update 2024.11.05 19:09
EUR/USD trades sideways with eyes on US presidential election

update 2024.11.05 19:09

  • EUR/USD wobbles near 1.0900 ahead of the US presidential election, which will influence market sentiment.
  • Investors expect a neck-to-neck competition between Kamala Harris and Donald Trump.
  • The ECB is expected to cut interest rates by 25 bps in the December meeting.

EUR/USD consolidates around 1.0890 in Tuesday's European session. The major currency pair remains shy of the key resistance of 1.0900 on the United States (US) presidential election day. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades steadily near 103.80 at the time of writing. 

The Greenback exhibited a strong buying trend in October as traders were pricing in former US President Donald Trump's victory. However, it struggles to extend its upside further as traders expect tough competition between Trump and current Vice President Kamala Harris now. The likelihood of Trump's victory has witnessed a pullback after the Des Moines Register/Mediacom Poll showed Harris gaining a slight lead of three points in Iowa state, where the Republican party gained a clear majority in 2016 and 2020.

"A Red Wave (favoring Republicans) would kick-start a sizeable USD rally. It would rekindle memories of US Exceptionalism, anchored by tariffs, tax cuts, deregulation, and negative impacts on the outlook for EZ and China," according to analysts at TD Securities.

While the US presidential election will be the key event for the US Dollar this week, investors will also pay close attention to the Federal Reserve's (Fed) monetary policy decision, which will be announced on Thursday. The Fed is expected to reduce interest rates by 25 basis points (bps) to 4.50%-4.75%, according to the CME FedWatch tool. Investors will focus on Fed Chair Jerome Powell's speech for fresh cues over likely monetary policy action in December.

On the economic data front, investors await the US ISM Services Purchasing Managers Index (PMI) data for October, which will be published at 15:00 GMT. The Services PMI is estimated to come in at 53.8, lower than 54.9 in September, suggesting that the activities in the service sector expanded but at a slower pace.

Daily digest market movers: EUR/USD remains flat-lined on the Euro's mixed performance

  • EUR/USD trades inside Monday's trading range as investors sideline ahead of the opening of polls for US election voting. The major currency pair is expected to be mainly guided by the US Dollar in an event-packed week. 
  • While the Euro (EUR) struggles for direction against the US Dollar, it performs weakly against Asia-Pacific currencies after upbeat Caixin Manufacturing and Services PMI. Still, it outperforms other major currencies as traders pare European Central Bank (ECB) dovish bets.
  • Market participants expect the ECB to cut the Deposit Facility Rate again in December by a usual size of 25 bps. Earlier, investors were anticipating a 50-bps interest rate cut by the ECB in its last policy meeting of the year as few officials highlighted growing risks to economic growth and emphasized the need for large economic stimulus to boost domestic spending and investment.
  • ECB's large rate cut bets diminished after better-than-expected Eurozone Q3 Gross Domestic Product (GDP) growth, which receded fears of an economic downturn. Meanwhile, revised German and Eurozone HCOB Manufacturing PMI estimates have improved against flash readings. However, the manufacturing output index remained below the 50.0 threshold, suggesting that the contraction trend remains intact.

Technical Analysis: EUR/USD remains shy of 1.0900

EUR/USD struggles for an establishment above the immediate resistance of 1.0900, which also aligns with the 200-day Exponential Moving Average (EMA). The pair rebounded sharply towards the end of October after gaining a firm footing near an upward-sloping trendline around 1.0750, which is plotted from the April 16 low at around 1.0600

The 14-day Relative Strength Index (RSI) climbs to near 50.00, suggesting some signs of a bullish reversal. However, this will only be confirmed if the RSI (14) climbs above 60.0 decisively.

Looking up, if the shared currency pair breaks above the 200-day EMA around 1.0900, it could rise to near the September 11 low around 1.1000. On the downside, the October 23 low of 1.0760 will be the key support area for the Euro bulls.

Euro FAQs

The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB's primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates - or the expectation of higher rates - will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB's 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone's economy.

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

 


Date

Created

 : 2024.11.05

Update

Last updated

 : 2024.11.05

Related articles


Show more

FXStreet

Financial media

arrow
FXStreet

FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.

Was this article helpful?

We hope you find this article useful. Any comments or suggestions will be greatly appreciated.  
We are also looking for writers with extensive experience in forex and crypto to join us.

please contact us at [email protected].

Thank you for your feedback.
Thank you for your feedback.

Most viewed

US Dollar steadies on the US presidential election day

The US Dollar (USD) steadies on Tuesday, with the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trading just below 104.00 and hanging onto important technical support as markets brace for the US presidential election.
New
update2024.11.05 21:23

USD/CHF Price Prediction: Bearish evidence builds for technical reversal

USD/CHF looks like it is reversing the uptrend of the last five weeks.
New
update2024.11.05 20:54

Oil production in Iraq fell to the agreed level in October according to a survey - Commerzbank

According to a Reuters survey, oil production in Iraq fell to just under 4 million barrels per day in October, thus meeting the requirements of the OPEC+ agreement without taking the promised compensatory cuts into account.
New
update2024.11.05 20:39

OPEC+ postpones planned production increase until the end of the year - Commerzbank

The OPEC Secretariat announced over the weekend that the voluntary production cuts of eight OPEC+ countries would be maintained in full until the end of the year.
New
update2024.11.05 20:34

Temporary increase in demand for Gold in India due to festivals - Commerzbank

Gold demand in India rose last week due to the festivals of Dhanteras (29 October) and Diwali (31 October), Commerzbank's commodity analyst Carsten Fritsch notes.
New
update2024.11.05 20:31

Gold price under the spell of US elections, Fed meeting in their shadow - Commerzbank

The gold price has retreated somewhat from its record level of the previous week and is trading at around $2,740 per troy ounce, Commerbank's commodity analyst Carsten Fritsch notes.
New
update2024.11.05 20:27

Crude Oil holds up amid Saudi Aramco lower profits,  storm Rafael threatening Gulf region

Crude Oil price ticks up on Tuesday for a second consecutive day, further banking on the delay in Oil production normalization by OPEC+. Lower supply could also be on the cards due to chances of disruption in the US Gulf region as  tropical storm Rafael
New
update2024.11.05 20:27

Gold steadies as traders brace for US presidential election outcome uncertainty

Gold (XAU/USD) continues to backslide from its record high, eventually finding support at $2,724 early on Tuesday and bouncing back to regain the $2,740s.
New
update2024.11.05 20:22

AUD/USD surges above 0.6600 as RBA maintains hawkish interest rate guidance

The AUD/USD pair revisits more than a week high of 0.6620 in European trading hours on Tuesday.
New
update2024.11.05 20:05

Silver Price Forecast: XAG/USD holds key support of $32.30 with US elections in focus

Silver price (XAG/USD) jumps to near $32.60 in Tuesday's European session.
New
update2024.11.05 19:25

Disclaimer:arw

All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.

The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.

  • Facebook
  • Twitter
  • LINE

Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy

I agree
share
Share
Cancel