EUR/USD Technical Analysis: Ahead of Political Statements

Accordingly, the dollar dropped against the Euro and the Pound Sterling, and fell to its lowest level in two weeks against the Canadian dollar. 

After the announcement of the improvement in US President Trump's health condition after suffering from Coronavirus symptoms and his quick admission to the hospital to conduct the necessary tests and take some vaccines. The investor's risk appetite increased, which was an opportunity for the EUR/USD pair to correct higher with gains that reached the 1.1798 resistance, the highest level for the pair in two weeks, before settling around the 1.1783 level at the beginning of Tuesday's trading, and ahead of important anticipated statements by both the European Central Bank Governor Lagarde and US Federal Reserve Governor Jerome Powell.

A new national poll fuelled growing expectations that the Democrats would sweep both the presidency and Congress, while the announcement of the president's health improvement appeared to improve the perception of investors who had been fearful for several weeks of a disputed outcome of the vote that could potentially disrupt the economy. Commenting on this, Stephen John Colangelo, foreign exchange trader at Western Union said, “The US dollar weakened as risk appetite improved at the start of the week.” Accordingly, the dollar dropped against the Euro and the Pound Sterling and fell to its lowest level in two weeks against the Canadian dollar. The dollar is taking its cues from the volatile US political developments. And last week reports of President Trump testing positive to Covid-19 provided some reassurance to global markets.

Trump hinted on Monday that he is preparing to return to the White House soon as the media has reported that he is excited for the speedy discharge from the hospital. Markets see Trump's health as important for holding the elections in a timely and reliable manner. Therefore, Trump's serious health implications are likely to translate into complications for US political and economic expectations.

Global financial markets, including the currency market, interact with levels of certainty about the outcome of the vote, and any developments that occur to improve certainty are likely to be interpreted as positive by investors who tend to buy stocks, commodities, and currencies that carry risks while selling the dollar.

Regarding who will win the US elections: Analysts say that a clear victory for any of the candidates will be welcomed by the markets because it will mean that any uncertainty surrounding the vote will evaporate immediately. Meanwhile, the sweep of Democrats will likely open the door to a major stimulus package introduced early by the new administration, which would help delay the economy until it manages to have a real and sustainable recovery after the coronavirus outbreak.

Expectations for Biden to win increased over the weekend after a new national poll showed that US President Donald Trump is now 14 points behind Biden, in less than a month until Election Day. An NBC/Wall Street Journal poll showed Biden has a 53-39% lead. The poll was conducted immediately after the tumultuous first presidential debate last Tuesday in Cleveland, in which a controversial president consistently boycotted both his rival and director Chris Wallace.

According to the technical analysis of the pair: There is no change to my technical view of the EUR/USD performance, as the bulls have already tried to test the most important 1.1800 resistance level to complete the upward rebound path, as stability above that resistance means preparing to test the 1.2000 psychological resistance level again. In contrast, according to the performance on the daily chart, the bears' breaching the 1.1690 support will end the current bullish idea, and from there, preparing for stronger descending levels.

As for today's economic calendar data: Regarding the Euro, the most important will be statements by European Central Bank Governor Lagarde on two occasions within one day, followed by other statements by Federal Reserve Governor Jerome Powell and the US Trade Balance figures.

Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.