FXstreet.com (San Francisco) - The Euro has closed the week above the 1.2820 key support against the Dollar. Yes, the EUR/USD lost 0.78% on the day to the current 1.2840, and declined 100 pips since the last week's close but the remained in the same range (1.2820 - 1.3140) since September 11.

The cause? The so-called catalyst hasn't come yet in form of Spanish bailout or in the body of almost certain president and despite recent good fundamental data in US, market is more focused on Greece coming back to news and uncertainty in election impact.

The United States will go to the polls next Tuesday November 6 to elect the president for the next four year. Barack Obama vs Mitt Romney and some surveys shows as Obama's victory is more likely than Romney's but his projected lead in the electoral votes is so slim that change in the White House is clearly within the grounds of possibility.

So, Florida, Ohio, Virginia and Colorado have the key as these states' outcome are highly uncertain. Polls indicate that President Obama would receive 281 of the electoral votes, slightly more than Governor Romney, who would have 257. Note that 270 votes are needed to win.

Unicredit's analysis team asked "What if Governor Romney wins?" in a recent report an they commented that "the main differences between Romney and Obama comprise the ways to address the fiscal deficit and health care policies. The election outcome might also impact the medium term monetary policy outlook as well as negotiations about the fiscal cliff."

The bank adds that "while Romney wants to cut the deficit exclusively through lower outlays (the tax reform should be revenue neutral), Obama proposes a more balanced approach with lower outlays and higher revenues."

So, which are the implications for the fiscal cliff. According to the Unicredit's baseline view, "the political parties will agree in time to extend most of the expiring tax provisions and spending programs." But "Congress won’t reach a deal in time." And about the monetary policy, With Obama's victory he will try to keep Bernanke in the chair or event nominate a Bernie's policies follower.

On the other side, Romney would like to have a much more hawkish candidate, "in that case, the Fed might start to tighten policy reins earlier than we currently expect. But even under a President Romney, an abrupt monetary policy shift in 2014 is not a done deal," comments Unicredit analysts.

Rob Carnell from ING believes that a Obama second term remains a distinct possibility. “Though with many of the swing states so closely contested, that this essentially remains an election too close to call.” His victory in the context of the fiscal cliff would be “dollar positive, treasury positive, risk negative.”

Rob Carnell also believes that Romney's victory, combined with an end of QE expansion, could have a similar outcome “though the timelines might well be somewhat different.”

The Danske Bank team argues that on the short-term, the probability of a smooth disarming of the fiscal cliff is seen as essential for risk markets. "A split congress is the most likely outcome (Base case: Barack Obama wins with a split congress: Risk 2 case: Mitt Romney wins with a split congress) and the outcome that would be a key near-term challenge for risk markets and supportive of government bonds and the USD".

Euro falls to test 200-day SMA and range bottom at 1.2820, key support

The euro continued to lose ground versus the dollar amid persistent doubts about the continuation of the Greek bailout. EUR/USD dropped over 100 pips throughout the day, hitting a low of 1.2820 and turning the immediate outlook pretty negative. The EUR/USD closed the week down 0.78% at 1.2840.

As for technical analysis, a break below the 200-day SMA around 1.2820/30 would mount pressure on the cross, while loss of 1.2800 could define a longer-term direction since that support has held for over 2-months. However, if the moving average proves strong enough to contain the dip it will provide relief to the cross and the euro could return to 1.2900 and even 1.3000 at the beginning of next week.

FXstreet.com Richard Lee says that "the bias has turned bearish for the major pair. Initial support targets are seen at 1.2803 October 1st session low, which is being reinforced by the 1.2746 38.2% fib support from the 1.2041-1.3171 bullish wave."


The week ahead: Forecast and key data

Looking the next week, Investors must pay attention to the US Election as well as the 5 most important event as follow:
1. ECB Interest Rate Decision (Nov 8)
2. BoE Interest Rate Decision (Nov 8)
3. RBA Interest Rate Decision (Nov 6)
4. ISM Non-Manufacturing PMI (Nov 5)
5. Consumer Price Index (YoY) (Nov 9)

The FXstreet.com's Exclusive Currencies Forecast from Banks, Brokers and Experts shows that a signal of impending trend change in the Euro is coming. As summary:

EUR/USD: 450 pips dispersion (without outliers), usually an impending trend change signal.
GBP/USD: Short-term estimations went up, mid-term went slightly down, while long-term is still down.
USD/JPY: Traders are not expecting the bullish sprint in the USD/JPY to be long lasting.
USD/CHF: Despite recent short term bullish momentum price projections continue to slide lower.