EUR/USD Forecast: Trump's bullishness may be premature and other reasons to go short

EUR/USD has been edging higher as President Trump pushed for fiscal stimulus.
Low chances of a deal, rising eurozone COVID-19 cases, and positioning ahead of the weekend may weigh on the pair.
Friday's four-hour chart is painting a mixed picture.

Yohay Elam FXStreet

Will the presidential U-turn trigger a U-shaped EUR/USD recovery? Not so fast. President Donald Trump has changed his mind and now wants to negotiate a stimulus deal with Democrats. The White House's new approach comes is boosting stocks and weighing on the dollar, helping the common currency.

Earlier this week, Trump abruptly cut off talks with Dems, a move he clearly regrets as he uses equity indexes as a measure of his success – and they dropped in response.

However, while Trump, House Speaker Nancy Pelosi, and US Treasury Secretary Steven Mnuchin want a deal, Senate Republicans seem reluctant to go along. Majority Leader Mitch McConnell said that some of his colleagues feel they have already done enough."

Moreover, the veteran Kentucky Senator added that his last visit to the White House was on August 6, as worries about their lax approach to coronavirus. McConnell seems to be distancing himself from Trump – perhaps calculating that the president is on his way out.

National and state polls have shown that challenger Joe Biden is increasing his gap against Trump, opening the door to a landslide victory. According to FiveThirtyEight, Biden has an 85% chance of winning, while The Economist gives the former VP a 92% probability of ousting the current occupant of the White House. Even when accounting for a polling error the size and direction of that in 2016, Biden is still forecast to win:

Source: The Upshot

For markets, it means a lower chance of stimulus, and thus a potential rise in the greenback.

More: State of the race: Where do Trump and Biden stand after the first debates, fast news

Other issues may also weigh on EUR/USD. Coronavirus cases are surging in the old continent, prompting a potentially new state of emergency in Spain, restrictions in more French cities, and measures in other countries as well. Infections in the EU are nearing American levels:

Source: FT

Another reason to be skeptical of EUR/USD gains is the long weekend in the US. Investors may prefer taking bets off the table.

All in all, there is a chance that the current rise is a selling opportunity.

EUR/USD Technical Analysis

Euro/dollar is rising but momentum on the four-hour chart remains to the downside. A break above the 200 Simple Moving Average still needs to be confirmed. Overall, the picture is mixed.

Strong resistance is at 1.1810, which is the weekly top and the highest since mid-September. That would open the door to 1.1830, 1.1870, and 1.1920.

Support is at 1.1780, which capped EUR/USD twice this week. Next, 1.1755, 1.1725, and 1.1685 provided support in recent weeks.

More: Elections Matter: The pause that decides

Premium

You have reached your limit of 3 free articles for this month.

Start your subscription and get access to all our original articles.

Subscribe to Premium Sign In

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.

EUR/USD looks weak below 1.1800

EUR/USD has slipped back under pressure, breaking through the 1.1800 support and drifting towards the weekly lows near 1.1770 ahead of the opening bell in Asia. The move reflects renewed strength in the US Dollar, with steady geopolitical tensions keeping its demand firm. Moving forward, the release of the German labour market report and flash inflation figures should keep European investors entertained on Friday.

GBP/USD threatens the 200-day SMA near 1.3440

GBP/USD rapidly leaves behind Wednesday’s strong advance, coming under heavy pressure and retesting the 1.3440 zone, where the critical 200-day SMA is located. Cable’s deep pullback follows the strong gains in the Greenback, while investors continue to pencil in a potential BoE rate cut in March.

Gold remains below $5,200 despite tariff jitters and geopolitical risks

Gold is seen consolidating in a range below the $5,200 mark during the Asian session on Friday amid mixed cues. Trade jitters, along with the risk of a potential US-Iran war, act as a tailwind for the safe-haven bullion. Meanwhile, the Fed's hawkish outlook keeps the US Dollar close to the monthly high and caps the non-yielding yellow metal. Nevertheless, the commodity remains on track to register gains for the fourth straight week, though the fundamental backdrop warrants some caution for bullish traders.