Amid the US Presidential Election job numbers in Focus on Friday – USD weakness ahead?

November 06, 2020 10:00

Source: Economic Events November 06, 2020 - Admiral Markets' Forex Calendar

The head-to-head race between Donald Trump and Joe Biden in the US Presidential Election is still underway.

It remains to be seen if US president Trump would accept a Biden win or if he would move forward with his "threat" from Wednesday morning, saying he will go to the US Supreme Court – a threat which does not come as much of a surprise after several remarks over the past weeks and months.

Price action wise, a victory from Joe Biden would seem to be considered "USD weak" among market participants for two primary reasons:

  • It increases the chances of a massive fiscal package arriving sooner rather than later to stabilize the US economy
  • There would likely be an ultra-dovish approach from the US central bank FED to finance that fresh US debt.

Technically, there would be a push into the region around 1.1600, the EURUSD September lows, but finding support here would be the first positive sign with further bullish momentum to be expected if the currency pair sustainably recaptured 1.1800.

In general, it seems as if the Euro can currently withstand any economic fears since France and Germany have introduced a 2nd lockdown, beginning this week onwards, raising questions if further ECB stimulus in the near-term is around the corner, potentially resulting the Euro selling on a broad scale due to the continuing expansion of the ECB balance sheet.

Given that "strong" sign, our US-Dollar scepticism and expected USD weakness in the days and weeks to come (probably triggered today by a weak US employment print), we expect a near-term stint up to 1.1870/1900 with a break higher, levelling the path up to the current yearly highs around 1.2000.

We also see chances getting smaller and smaller of a break below 1.1600 and a stint as low as 1.1450/1500 after recent developments and price action:

Source: Admiral Markets MT5 with MT5SE Add-on EURUSD Daily chart (from July 31, 2019, to November 05, 2020). Accessed: November 05, 2020, at 10:00 PM GMT. Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the EURUSD fell by 10.2%, in 2016, it fell by 3.2%, in 2017, it increased by 13.92%, in 2018, it fell by 4.4%, and in 2019, it fell by 2.2%, meaning that in five years, it was down by 7.3%.

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