- EUR/USD is posting strong gains as investors get ready for US election.
- US Dollar Index is pushing lower on Tuesday.
- Market volatility is set to increase during the Asian trading hours.
Following a six-day losing streak, the EUR/USD pair touched its lowest level in more than a month at 1.1623 on Monday but closed virtually unchanged at 1.1640. With the greenback coming under heavy selling pressure on Tuesday, the pair staged a decisive rebound and was last seen gaining 0.52% on the day at 1.1700.
DXY slumps toward mid-93s
After closing the previous week more than 1% higher, the US Dollar Index (DXY) edged higher at the start of the week but lost its traction on Tuesday. In the absence of significant fundamental drivers, investors might be looking to book their profits while waiting for first results from the US presidential election to arrive during the early Asian session on Wednesday. At the moment, the DXY is down 0.45% on the day at 93.62.
FXStreet analyst Yohay Elam thinks that if former Vice President Joe Biden wins the election with Democrats taking the Senate and the House, EUR/USD could push higher with the greenback losing strength on stimulus prospects.
“In such a scenario, Dems would also win the Senate and the House, allowing them full control of the government,” Elam says. “They could swiftly pass a generous stimulus bill, either worth around $2 trillion like they were close to signing off with the GOP, or even $3.4 trillion they originally passed in May.”
For other possible outcomes and their potential impact on EUR/USD: EUR/USD Forecast: How three US election outcomes (and a contested result) could rock the dollar.
On the other hand, investors will keep a close eye on the surging number of coronavirus cases in Europe. If major European economies struggle to limit the spread of the virus and are forced to impose additional lockdown measures, the shared currency could find it difficult to outperform its rivals.
Technical levels to watch for
Credit: FX Street