EUR/USD Forecast: Euro set to resume falls as elections enter contested territory
- EUR/USD has been experiencing high volatility as the US presidential elections are yet to be decided.
- The longer the race extends, the better for the safe-haven dollar.
- Wednesday's four-hour chart is favorable for the bears.
Into infinity and beyond – the neverending US 2020 Presidential Elections have no clear winner at the time of writing, pushing the safe-haven dollar higher and potentially extending its gains.
President Donald Trump has outperformed opinion polls with an early clinch of Florida – his newly-adopted home state. Carrying the Sunshine State instantly made the race far closer than anticipated and sent EUR/USD to 1.16. The currency pair recovered when rival Joe Biden pulled ahead in Arizona – with some networks calling the state for him.
"Mirages" complicated the case. A "red mirage" of a Trump win was seen in Georgia, and in several Midwestern states, while a "blue mirage" was seen in North Carolina, Texas, and Ohio.
At the time of writing, the races in North Carolina, Georgia, Wisconsin, Nevada, Michigan, and last but not least, Pennsylvania – all remain open.
Biden expressed optimism about winning and said the American people will eventually decide, while Trump said "Frankly, It think we won" and accused Democrats of fraud. Trump tweeted "they are trying to steal the election." The president's statement sent markets tumbling and the dollar higher.
However, markets have since calmed, allowing EUR/USD to move higher in anticipation of more results, and as Biden seems to be gaining ground in Wisconsin.
It is essential to note that several states allow mail-in ballots to arrive after election day – as long as they are postmarked on November 3 or beforehand.
Patience is virtue markets do not possess.
The longer the process lasts, the less this is likely. A contested election is the markets' worst scenario. Even if the networks call winners in states and a victor in the presidential elections, lawyers are already gearing up for legal fights. Recounts could be called if races are withing razor-thin margins, further prolonging the process.
Investors originally preferred a "blue wave" that would see Democrats winning the Senate in addition to the White House. However – at least for now – Republicans seem to hang onto seats in North Carolina and Maine, thus retaining control.
In this outcome, there is room for a change of heart for markets – potentially preferring Trump.
See 2020 Elections: Why markets may now ditch Biden and cheer Trump
The dramatic US elections overshadow other developments. In Europe, coronavirus cases continue rising at a worrying rate, yet no new lockdown measures are announced. In America, the ADP private-sector Non-Farm Payrolls and the ISM Services Purchasing Managers' Index are set to print robuts figures. Both serve as hints to Friday's Nonfarm Payrolls, yet market attention is directed at the states.
European Central Bank member Hernando de Cos said it is highly likely the ECB could implement new measures in December – echoing the words of his boss, President Christine Lagarde.
EUR/USD Technical Analysis
Euro./dollar volatility has exploded, and as the just settles, bears remain on top. The currency pair is trading below the 50, 100, and 200 Simple Moving Averages, while momentum is flitting between the upside and the downside.
Support awaits at 1.1650, which served as support last week, followed by 1.1620 and the fresh low of 1.16.
Resistance is at 1.1710, a swing high from last week, followed by 1.1720 and 1.1770, the latter being the election night high.
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.
