EUR/USD: The spot balances as the ballot box approaches

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The selling and buying forces were balanced at the end of the wedge formation, on the Euro/Dollar currency pair, while November 5 is election day in the United States: the Americans, a fringe of whom have already voted in advance , are called to the polls to elect the electors who will in turn elect the President. The House of Representatives will be completely renewed, as will a third of the Senators. In parallel with these elections, positions of Governors will be up for grabs, and referendums will be organized locally.

“The finish line is getting closer for the American elections but it is impossible, at this stage, to predict the winner,” for Romane Ballin, bond manager at Auris Gestion. “Thus, if last week a victory for D. Trump seemed more and more likely, the cards were reshuffled again this weekend while certain polls showed themselves more favorable to Kamala Harris, notably in Iowa, a traditionally republican stronghold.”

Elections which will be followed on November 6 and 7 by a new meeting of the Fed’s Monetary Policy Committee (FOMC). A 25 basis point cut in Fed Funds is widely anticipated.

“With all these uncertainties [politiques, fiscales, budgétaires, commerciales]”Central bankers must still fly by sight to land the economy, and we expect data dependence to once again be the central message of the press conference, probably with a slightly hawkish*”, warns Christian Scherrmann, economist at DWS Group. “But since current key rates are still well above what can be considered neutral, the Fed certainly has some room for maneuver when it meets in November and in December.”

Yesterday on the statistical side, RAS on the side of the final data from the PMI barometers in the Euro Zone, very close to the first estimates for the month of October. No significant deviation from the consensus also for the Sentix index of investor confidence in the monetary union. The index came out at -12.8, still stuck in negative territory. The only German component, under the magnifying glass of currency traders obviously, improves a little, by almost two points.

Forex traders will closely follow the publication at 4:00 p.m. of the ISM services index in the United States, expected to fall very slightly to 53.8. As a reminder, a score above the pivot of 50 points means an expansion of the sector of activity considered.

At midday on the foreign exchange market, the Euro was trading against $1.0890 approximately.

* belligerent, offensive, rigid.

KEY GRAPHIC ELEMENTS

The oblique support line (drawn in black) has given way in a significant and increasing level of volatility. The 50-day moving average (in orange) also gave way quickly, the bearish message is reinforced. Next graphic event to watch, the ongoing crossing of two remarkable moving averages, at 20 and 50 days. The crossing angle is important, in light of the current correction. The flagship currency pair is currently in the process of finalizing a wedge plot.

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).

Our entry point is at 1.0893 USD. The price target for our bearish scenario is at 1.0551 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0981 USD.

The expected profitability of this Forex strategy is 342 pips and the risk of loss is 88.000000000001 pips.

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