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EUR/USD Tests 1.1700 on Pre-Election US Dollar Weakness

EUR/USD Tests 1.1700 on Pre-Election US Dollar Weakness

Nick Cawley, Strategist

EUR/USD Price, News and Analysis:

  • EUR/USD pressing into technical resistance as the greenback weakness.
  • IG trader sentiment remains negative.

The US dollar is slipping lower in European turnover ahead of the 59th US presidential election in thin market conditions. The US dollar basket (DXY) is paring some recent gains and trades nearly 0.50% lower at 93.60 after making a five-week high yesterday. Technical support remains close off the 20- and 50-day simple moving averages but with volatility expected to rise as the election results hit the screens, support and resistance levels may be broken with ease.

EUR/USD is stalling around 1.1700 and any push above here will meet with further areas of resistance, with the 20- and 50-day simple moving averages seen between 1.1750 and 1.1763. The CCI indicator suggested that EURUSD was oversold recently, so today’s move, driven by US dollar weakness, maybe balancing out this market set-up.

The Euro as a currency will likely find it difficult to appreciate in its own right over the next few weeks and months. The recent second round of coronavirus lockdowns in Europe has sparked concern that Q4 GDP figures for the single-block will be a lot weaker than expected with some banks now seeing negative growth at the end of the year. The ECB has already stated that it will do whatever is needed with whatever tool/s that are appropriate with the December central bank meeting the starting point for the next round of monetary stimulus.

EUR/USD Daily Price Chart (February – November 3, 2020)

EUR/USD Tests 1.1700 on Pre-Election US Dollar Weakness

IG Retail trader datashow53.93% of traders are net-long with the ratio of traders long to short at 1.17 to 1.The number of traders net-long is 18.90% higher than yesterday and 57.52% higher from last week, while the number of traders net-short is 11.39% lower than yesterday and 39.99% lower from last week.We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall.

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/USD-bearish contrarian trading bias.

What is your view on EUR/USD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.