- Kamala Harris became more popular, which led to the unwinding of the Trump trade.
- Market participants await the FOMC policy meeting.
- Experts believe that Trump’s policy changes will increase inflation.
EUR/USD Outlook Shows Dollar Weak as Markets Pull Trump Trade. Recent polls have shown Trump less likely to win. Meanwhile, they showed Kamala leading in places like Iowa, a Republican stronghold. Still, the race remains tight.
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Initially, bets favored a Trump victory, which boosted the dollar. However, in recent days, Kamala Harris has become more popular, leading to the unwinding of Trump’s trade. Trump has proposed several policy changes that would affect tariffs and taxes. Moreover, experts believe that these changes would increase inflation, boosting the dollar.
On the other hand, Kamala is more likely to continue with existing policies. Therefore, the Fed would continue to lower borrowing costs, which would hurt the dollar. A weak dollar allows the euro to rise. Moreover, the tight race has created a lot of uncertainty that could increase volatility after the election results.
Meanwhile, market participants are also looking ahead to the FOMC’s policy meeting. The Fed will meet after the election results and markets cut rates by 25 basis points. However, data last week revealed an unexpected drop in job growth that could change the outlook for future rate cuts.
Initially, policymakers struck a more cautious tone, with some predicting just one more rate cut this year. Therefore, traders will be watching the messages to find out whether the central bank will cut rates in December. A cautious tone will lift the dollar. On the other hand, if Powell strikes a more dovish tone, rate cut expectations will increase, pushing the dollar lower.
EUR/USD key events today
- US ISM services PMI
- US presidential election
- elections for the US Congress
Technical outlook EUR/USD: resistance at 1.0900 is a challenge
From the technical side, EUR/USD the price has risen above the 30-SMA in a new bullish trend. At the same time, the RSI is trading above 50, indicating strong bullish momentum. However, the price faces a strong obstacle at the 1.0900 resistance level.
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An increase in momentum would push the price above this level to make a new high in the uptrend. On the other hand, if the resistance remains firm, the price will fall to retest the SMA support. A break below the SMA would clear the way to the support level at 1.0800.
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