EUR/USD Weekly Forecast: Greenback holds firm despite looming US political stalemate

The EUR/USD pair finished the first week of November trading around 1.1140 after spending pretty much a month ranging around 1.1200. Critical headlines were partially overshadowed by persistent uncertainty, with the pair leaning bearish but still trapped.

United States mid-term elections

The US Dollar (USD) weakened throughout the first half of the week, in anticipation of a Democratic victory in the United States (US) mid-term elections. The Greenback fell further late on Wednesday, once markets knew the Republican Party got smashed, as Democrats' gains were far greater than most forecasts.

Democrats have seized control of Congress, gaining seven seats in the Senate to a total of 54 representatives, and 41 seats in the House to clinch a majority of 253. Additionally, President Donald Trump’s party lost five state governors to Democrats.

Inflation from the Middle East war was what pushed Americans to vote against the ruling party. Despite multiple macroeconomic indicators reflecting above-average economic performance, Americans are unhappy about the cost of living.

The US government is now divided, with one party in the White House and the other in Congress. Generally speaking, that means more stable markets amid a stalemate in the country’s agenda, but that may not be the case this time. President Trump acknowledged Democrats' victory and said he is willing to work with the rival party, but also said he would become “Mr. Veto.”

US Dollar weakness short-lived

USD weakness did not last long. The Greenback recovered as stocks collapsed on Thursday, with techs leading the slump and wiping millions off markets. The Democratic victory in the US spurred concerns that the party will focus on AI regulation once they take control of Congress. Investors rushed into bonds, resulting in easing Treasury yields.

The US Dollar recovered further on Friday after an upbeat US  Nonfarm Payrolls (NFP) report, which showed the US economy added 165K new jobs in October, much better than the 65K anticipated. The Unemployment Rate shrank to 4.1%, also better than expected, while the participation rate ticked higher, from 61.8% in September to 61.9%.

The solid employment report revived speculation that the Federal Reserve (Fed) will hike interest rates in December, while reaffirming America’s economic resilience.

Middle East on calm

The mid-term election result also boosted hopes that the US and Iran will look for a diplomatic solution to the Persian Gulf conflict, despite Trump’s threats of massive attacks after the elections. Tensions de-escalated further, and Oil prices softened post-election, still not enough to spook the inflation ghost. Besides, Trump’s decisions are impossible to predict, which is still a major factor fueling concerns.

Europe to hike rates again

Things ont the Old Continent don’t look good: Eurozone inflation rose to a three-year high of 4% in October, driven by food and energy costs, and is expected to keep climbing in the upcoming months, backing the case for a rate hike in December.

European Central Bank President (ECB) Christine Lagarde, who is scheduled to step down on February 7, 2027, hit the wires on Thursday and noted that inflation risks persist and that it is still necessary to apply tools to avoid inflation running away, adding that data between now and December will help determine whether a hike is necessary. At this point, however, financial markets are pricing in roughly an 80% chance that Lagarde & co will go for a 25 basis point (bps) hike in December.

Focus  turns to inflation

The new week starts with the US publishing the October Consumer Price Index (CPI) on Tuesday, while Germany will publish the final estimate of the October Harmonized Index of Consumer Prices (HICP) on Wednesday.

Given hotter-than-anticipated European figures, it would be no surprise that global inflationary pressures continued mounting among major economies. If US figures are higher than anticipated, market participants may resume betting on aggressive interest rate hikes and hence give the Greenback an additional boost.

Friday will bring the Eurozone’s second estimate of the Q3 Gross Domestic Product (GDP), while the US will publish the October Producer Price Index (PPI).

Also, multiple Fed and ECB officials will participate in different events throughout the week. US policymakers may have some interesting hints on monetary policy decisions after the US political shift.

EUR/USD Technical Outlook:

The EUR/USD pair is ending the week flat, but at the lower end of its recent range, which skews the risk to the downside. Market players are now looking at a potential test of the psychological 1.1000 threshold and whether it can be breached before year-end.

The daily chart shows EUR/USD extending its bearish bias. Spot holds below the 20-day Simple Moving Average (SMA) at 1.1192 and remains well below the 100-day SMA at 1.1415 and the 200-day SMA at 1.1541. The longer moving averages are slowly grinding lower, reflecting increased selling pressure. At the same time, technical indicators have turned firmly lower below their midlines, with the Relative Strength Index (RSI) indicator hovering near 39, reflecting that sellers hold the grip.

On the weekly chart, EUR/USD is also clearly bearish, developing well below the 20-week and 100-week SMAs while barely holding above the 200-week SMA at 1.1110. The Momentum indicator gains downward traction below its midline, while the RSI indicator hovers and dips into negative territory, lacking strength but still skewing the risk to the downside.

On the topside, immediate resistance is seen at the 20-day SMA near 1.1192, followed by the 1.1240 price zone. Further gains expose the 1.1300 mark, where sellers are likely to reappear. On the downside, immediate support is located at the 200-week SMA near 1.1110, with a break below it opening the door to an extension of the downtrend, initially towards 1.1000, where bears' determination will likely be challenged.

(The technical analysis of this story was written with the help of an AI tool. Know more.)