EUR/USD Forex Technical Analysis – Republican Win Could Weaken Greenback, Underpin Euro

The Euro is edging lower against the U.S. Dollar on Tuesday as traders booked profits ahead of today’s U.S. mid-term elections. Nonetheless, the single currency is still hovering around parity – the elusive level it regained the previous session – as investors bet an easing of COVID restrictions in China would help German exports.

At 12:39 GMT, the EUR/USD is trading .9998, down 0.0024 or -0.24%. On Monday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $92.44, up $0.56 or +0.61%.

Bulls Wagering on Republican House, Senate Victories

Although the U.S. is holding its elections on Tuesday, traders may not know the actual outcomes until Thursday. At stake is the U.S. House of Representatives and the Senate.

The major news services are reporting that the Republicans are gaining momentum ahead of the opening of the polls.

Historical data shows that if the Republicans gain control of both the House and the Senate, Treasury instruments could rally and yields could fall, dragging down the U.S. Dollar. This would boost demand for the Euro. The data is based on the theory that Republicans would spend less and thus dampen the need for government bond sales that tend to drive up yields.

If the Democrats retain control then look for more spending and inflation. This would strengthen the dollar and weaken the Euro since it would likely lead to higher interest rates.

If the election ends in a stalemate then the Euro could trade flat-to-lower.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0094 will reaffirm the uptrend. A move through .9730 will change the main trend to down.

On the downside, the nearest support is a 50% level at .9952, followed by a short-term retracement zone at .9816 to .9750.

On the upside, the nearest resistance is a 50% level at 1.0076.

Daily Swing Chart Technical Forecast

Trader reaction to the 50% level at .9952 is likely to determine the direction of the EUR/USD on Tuesday.

Bullish Scenario

A sustained move over .9952 will indicate the presence of buyers. Taking out yesterday’s high at 1.0034 will indicate the buying is getting stronger. This could trigger a surge into the resistance cluster at 1.0076 to 1.0094.

Bearish Scenario

A sustained move under .9952 will signal the presence of sellers. This could trigger the start of an acceleration to the downside with .9816 the next potential downside target.