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The EUR/USD pair is relatively volatile as traders react to results of the American election and mixed economic data from Europe. It is trading at 1.1696, which is between the days low of 1.1600 and high of 1.1770.
US results point to a Biden win
The market is reacting to the rising odds that Joe Biden will win the election. According to the Wall Street Journal, the former vice president has won 238 electoral votes compared to Trump’s 213. Most importantly, he is leading in Michigan, Wisconsin, and Nevada, which means that he has a higher probability of winning. Similarly, gamblers have also started pricing-in a Biden victory, as shown below.
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In general, analysts believe that a Biden win will lead to a relatively stronger euro for several reasons. First, it will eliminate the likelihood of a tit-for-tat trade war between the European Union and the United States. Second, it will lead to a likelihood of a stimulus deal in the United States, which will eliminate the risk factor that tends to favour the dollar. Finally, in his administration, investors expect more government spending that will lead to more deficits.
Mixed economic data
The EUR/USD is also reacting to the mixed economic data from the United States and Europe. Earlier today, data released by Markit showed that the Eurozone’s services PMI declined to 46.9 in October as the region continued to battle the pandemic. That was the fourth straight month that the PMI has been below 50.
In the report, the report cited the decline to the continued decline in levels of incoming new business both domestically and externally. The employment in the sector were cut by half while the cost of inputs continued to rise. At the same time, business confidence declined to a five month low as the number of Covid-19 cases continued to rise. In the statement, Markit said:
“Optimism about the future also slumped sharply lower, sliding to the gloomiest since May as companies grew more anxious about the damaging impact of second waves of infections.”
Elsewhere, in the United States, the service PMI rose to 56.9, beating the consensus estimates of 56.0. The composite PMI also rose to 56.3, which is evidence that the American economy is still doing well.
EUR/USD technical outlook
The EUR/USD pair is trading at 1.1693. On the daily chart, we see that the price is at the same level as the 25-day and 15-day exponential moving averages. It is also above the important support of 1.1612, where the pair formed a double bottom pattern. Therefore, the pair is likely to continue rising as bulls attempt to move above the 1.1700 resistance level. Get started in trading with our free forex trading course.
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