EUR/USD rallies on Greenback weakness heading into US presidential election

• EUR/USD climbed on Tuesday, netting a half-percent gain and touching a three-week high.
• Fiber pushed back above the 200-day EMA, but plenty of technical issues remain.
• Looming Fed rate cut to give investors plenty to chew on following US presidential election.

EUR/USD benefited from a broad-market decline in the US Dollar as global markets brace for early polling outcomes from the US presidential election that kicked off on Tuesday. Fiber jumped two-thirds of one percent to claw back above the 1.0900 handle as investors hope for a market-positive outcome as the US election cycle gets set to pick the next US President for the next four years.

Outside of an appearance from European Central Bank (ECB) President Christine Lagarde, EU-based market data remains relatively limited this week. Pan-EU Retail Sales figures are due on Thursday, with this week's EU leaders' summit set to wrap up on Friday and a follow-up appearance from ECB President Lagarde slated for Saturday when the market will be closed.

US election odds have both candidates neck-and-neck in a dead-heat race for the Presidency, with former President Donald Trump and current Vice President Kamala Harris polling within 5% of each other, depending on which poll results you reference. Equity investors, tech sector addicts specifically, appear to broadly believe former President Trump to be the preferred stock-friendly candidate, an odd choice considering the Republican candidate has strongly voiced support of a return to the Smoot-Hawley tariff era of US history. Trump has regularly suggested stiff tariffs across the board on all imported goods into the US, an incredibly inflationary economic policy proposal.

Another Federal Reserve (Fed) rate call looms ahead this week. Fed Chair Jerome Powell is widely expected to deliver another quarter-point cut to interest rates on Thursday, bringing the Fed Funds Rate down 25 bps to 4.75%. The Fed Funds Rate peaked at 5.5% in July of 2023, and investors have been clamoring for a return to a low interest rate environment that has become familiar territory since US interest rates clattered to an all-time low near 0% in early 2009.

The University of Michigan's (UoM) Consumer Sentiment Index is waiting in the wings and slated for release on Friday. Investors expect November's UoM sentiment indicator to climb to a six-month high of 71.0 from the previous month's 70.5.

EUR/USD price forecast

The EUR/USD pair is currently staging a rebound above the 1.0900 level after a period of decline, with recent bullish momentum challenging the 50-day EMA, situated at 1.0937. This level aligns closely with the pair's current trading range, indicating that the area between 1.0900 and 1.0937 could act as a near-term resistance zone. The 200-day EMA, positioned at 1.0902, provided initial support, allowing the pair to bounce back from the lows seen earlier in October, signaling a potential shift in sentiment toward the upside.

The MACD indicator on the daily chart shows signs of recovery as well, with the MACD line inching closer to the signal line and the histogram flipping into positive territory. This transition suggests a potential build-up in bullish momentum, although the crossover has yet to materialize decisively. A clear MACD crossover, if achieved, could support further gains in the short term. For now, traders should be cautious as the pair remains at a crucial juncture where rejection from the 50-day EMA could lead to another downside test.

In the immediate term, sustained buying pressure could propel EUR/USD toward the 1.1000 psychological resistance, with further gains likely if buyers manage to clear the 50-day EMA. On the downside, any loss of the 1.0900 level could see the pair revisiting 1.0850 and, potentially, the October lows near 1.0700. Overall, while the pair's technicals indicate a cautiously bullish outlook, EUR/USD remains vulnerable to reversal if it fails to break above the moving averages decisively.

EUR/USD daily chart