EUR/USD Forecast: Are bulls taking over? Trump holds the key on stimulus deadline day

EUR/USD has been edging up amid hopes for US fiscal stimulus.
Eurozone coronavirus cases and political uncertainty are holding the currency pair back.
Tuesday's four-hour chart is showing an improved position for the bulls.

Yohay Elam FXStreet

There is nothing like a deadline to sharpen minds – and there is a growing chance for a large fiscal stimulus package in the US. Stcoks are attempting recovery and the safe-haven dollar is on the back foot, allowing EUR/USD to rise.

House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have expressed optimism and have noted that the gap is "narrowing" after holding a long call on Monday. Democrats wanted a bill worth around $2.2 trillion while the White House's offer came short of the $2 trillion mark.

Pelosi set to Tuesday as the deadline to reach a deal – talks have been dragging on for months and the elections are due in exactly two weeks. Will white smoke come out of Capitol Hill?

President Donald Trump has been eager to reach a deal lately, but opposition within his own party. Senate Majority Leader Mitch McConnel is set to push through a sub $1 trillion bill through the upper chamber. Chuck Schumer, his Democratic counterpart also retorted that current GOP offers are "unacceptable."

Will Trump push for a deal and can he impose his will? That remains an open question. Markets are set to seize on any hint if an agreement is coming or not.

Opinion polls are little moved ahead of the elections, with Trump trailing rival Joe Biden by 8.9% according to RealClearPolitics, while models by The Economist and FiveThirtyEight are averaging a 90% chance for a change at the top. The Senate race – which is critical for passing new relief packages – remains close, with around 74% according to the models.

Source: FiveThirtyEight

See 2020 Elections: Seven reasons why this is not 2016, time to focus on the Senate

Few surveys are likely to come out ahead of the second and last presidential debate late on Thursday. The commission responsible for the encounters announced that the candidates will receive two minutes of uninterrupted time in every segment – muting their rival's microphone.

The top topic in the elections is a coronavirus, which is spreading in the US and more rapidly in Europe. Ireland and Wales announced new restrictions, while Belgian officials fear a "tsunami" of infections.

Source: FT

Christine Lagarde, President of the European Central Bank, raised concerns of a slowdown stemming from this second wave. The ECB announces its decision next week, and for now, no new measures are anticipated. However, additional COVID-19 statistics and lockdown news may push the Frankfurt-based institution to action.

John Williams, President of the New York branch of the Federal Reserve, will speak later in the day. Williams is considered No. 3 at the bank, but he is unlikely to rock the boat ahead of the elections. Building Permits and Housing Starts figures for September are also due out on Tuesday.

Overall, the focus is on fiscal stimulus, but coronavirus concerns could take over at some point.

EUR/USD Technical Analysis

Euro/dollar has managed to rise above the 50, 100, and 200 Simple Moving Averages on the four-hour chart ~ a bullish development. Momentum has also turned positive while the Relative Strength Index is below 70, outside overbought conditions.

All in all, bulls are in control.

Resistance awaits at 1.1795, Monday's peak, followed by 1.1830, which is October's top. The next line to watch is 1.1870.

Support is at 1.1720, which is a swing low last week, followed by 1.1685, a double-bottom. Further below, 1.1625 awaits EUR/USD.

More Big move coming in EUR/USD? Fiscal stimulus and coronavirus are the keys

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

GBP/USD flirts with weekly highs in the Fed's aftermath

GBP/USD reversed early losses following the Federal Reserve decision to keep rates on hold and neared the 1.3360 level before shedding some ground. Focus shifts to Governor Kevin Warsh's speech, while the Bank of England will announce its monetary policy decision on Thursday.

EUR/USD extends rally pass 1.1450 on Fed's Warsh

EUR/USD trades at fresh weekly highs above 1.1450, following the Federal Reserve monetary policy decision to keep interest rates on hold. The statement showed policymakers remain confident in economic progress while blaming inflation on energy prices. The divided vote among officials put in doubt a September hike, leading to sharp US Dollar losses.

Gold faces rejection near $4,100 amid emergence of USD dip-buying

Gold struggles to build on a modest intraday uptick beyond $4,100 during the Asian session on Thursday as the US Dollar attracts some dip-buyers following the previous day's post-FOMC slide to a one-week low. Escalating US-Iran tensions support oil prices, fueling inflation fears and bolstering bets for at least one Fed rate hike in 2026. This, in turn, underpins the Greenback and acts as a headwind for the non-yielding bullion.

Bitcoin trails US Dollar as Fed holds rate steady

The Federal Reserve (Fed) kept its benchmark interest rate unchanged at 3.50% to 3.75% at its July meeting on Wednesday, in line with market expectations. Minutes from the meeting showed that economic activity has been expanding at a solid pace despite elevated uncertainty. The central bank also noted that job gains have "kept pace with the workforce."

No soft target: Warsh vows to return inflation to 2%

The Fed left interest rates unchanged at 3.50%-3.75%, but the decision carried a distinctly hawkish edge as three officials voted for an immediate 25-basis-point increase. Chair Kevin Warsh reinforced that message, insisting there was no tolerance for a softer inflation target and warning that the Fed would not hesitate to act.

US Dollar mid-year outlook: Exceptional currency, exceptional risks?

The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.