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EURUSD: markets riveted on US election result

EURUSD traded marginally lower on Monday, November 2, with the single currency ticking down 0.03% against the US dollar to close at 1.1641. The intraday low touched 1.1622 during the North American session.

The greenback is still going strong amid deteriorating risk sentiment due to a recent wave of new lockdowns in France, Germany and the UK. Uncertainty over the outcome of the US election has stroked additional concerns for investors, who are fearful that if one of the candidates contests the other’s victory, this could trigger massive political instability across the country.

Todays macro agenda (GMT+3)

No market-driving releases are due out stateside today.

1

Current outlook

A double bottom has shaped up at 1.1623. FX players are hovering in wait-and-see mode so as not to expose their deposits to risks. In early morning trading tomorrow on November 4, market volatility could spike to 3.5%, or about 400 pips. In November 2016, after the victory of Donald Trump, the euro exchange rate soared 270 pips to 1.1299 (+2.45%), after which the price action plunged 7.43%.

The election can be expected to exert an impact on the market for about two weeks (9-10 trading sessions). If Donald Trump emerges victorious, volatility will be less than if Joe Biden wins. The euro retreated sharply in the wake of the elections in 2012 and 2016. Given that the coronavirus currently compounds the election factor, the likelihood of a steep pullback in EURUSD stands at over 70% for the single currency.

Ahead of Election Day major currencies are likely to mark time within their established ranges. For the euro, this range stands at 1.1620-1.1675. Today’s macro agenda is empty. Given that the euro is being bought in crosses, the above range will likely broaden to 1.1620-1.1705.

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