EUR/USD has taken on the role of an election barometer, reflecting the tug-of-war between the dollar’s fluctuations and shifting poll dynamics. With the U.S. presidential race on a knife-edge, let's take a look at how this currency pair is navigating election day, and the key technical levels that could shape its path in the days ahead.
Why EUR/USD is an Election Barometer
EUR/USD, as the most traded currency pair, often mirrors the global market’s risk appetite and its outlook on U.S. economic policies. A Trump-led administration has traditionally been seen as dollar-positive due to his pro domestic business policies, including tax cuts and tariffs aimed at protecting U.S. manufacturing. On the other hand, a Democratic win, led by Kamala Harris, is viewed as potentially softer on the dollar due to increased fiscal spending, climate initiatives, and regulatory tightening that could put pressure on U.S. growth rates. As a result, EUR/USD is acting as a gauge for the market’s reaction to each new poll release, particularly as expectations shift from a Trump victory to a Harris edge in the final days.
Technical Analysis: EUR/USD on Election Day
Daily Chart:
EUR/USD began October in a downtrend following a September double-top reversal that sent the pair into a sustained sell-off as the dollar strengthened on Trump’s rising odds. The sell-off drove EUR/USD below both its 50-day and 200-day moving averages (MAs), signalling a shift toward bearish sentiment. However, recent developments in polling have seen the dollar weaken, enabling EUR/USD to break back above the 200-day MA—a signal that the bulls are tentatively returning. This recovery points to a potential shift in control, but today’s election volatility could test this level once again, keeping the 200-day MA as a key level to watch.
Past performance is not a reliable indicator of future results
Hourly Chart:
Drilling down to the hourly chart reveals more granular election-driven price action. The week opened with a bullish price gap, indicating renewed dollar weakness, as polls favoured Harris over Trump. On Monday, the top of this gap served as an initial support level, providing a cushion for buyers amid elevated election tension. If EUR/USD fills this gap, the lower boundary could act as secondary support, serving as a test of whether the dollar’s pullback has further to run.
Past performance is not a reliable indicator of future results
Outlook: Election Scenarios for EUR/USD
As the U.S. awaits election results, EUR/USD is positioned at a pivotal point. Should Harris win, the dollar may weaken further, potentially driving EUR/USD toward key resistance levels and beyond, as investors price in increased fiscal spending and regulatory changes. However, a Trump win could reverse recent sentiment, likely strengthening the dollar and pushing EUR/USD back below the 200-day MA, possibly revisiting October’s lows.
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