EUR/USD outlook deteriorates amid rising odds of Trump victory ahead of key data

The EUR/USD faces a very important next few days, with key data from both sides of the pond on tap, before the focus turns to US presidential election next week when the Fed also decides on monetary policy. This week’s US data releases include JOLTS Job Openings and CB Consumer Confidence, both due later on today, ahead of the more significant Advance GDP (Wednesday), Core PCE (Thursday), ISM Services PMI and Non-farm Payrolls (both on Friday). Ahead of all these events, the EUR/USD outlook remains modestly bearish with rates struggling to hold above the 1.0800 handle. Traders are pricing in the increased odds of a Trump victory in the US presidential election, which is deemed to be a positive outcome for the US dollar.

JOLTS Job Openings: Key Data for EUR/USD today

With the Fed's focus shifting toward employment metrics, the JOLTS Job Openings report due for release shortly will be crucial for the EUR/USD outlook. Although this data release is slightly dated (covering August), it’s still a valuable market indicator. Job openings are a leading signal for overall employment trends, typically taking months to fill, and last month’s unexpectedly high figure of 8.04 million provided a boost to the dollar. If the data shows further strength, it could drive expectations for a strong NFP report on Friday, influencing the EUR/USD by boosting demand for the dollar. The opposite is also true. This is expected to print 7.98M this time.

Meanwhile, the CB Consumer Confidence, also released at 14:00 GMT, is expected to print 99.5 vs. 98.7 the previous month.

US Advance GDP and NFP additional catalysts for EUR/USD outlook

Wednesday's release of the initial estimate of Q3 GDP for the U.S. will provide fresh insights into the economy's performance and could be a pivotal moment for the EUR/USD’s short-term outlook. Last quarter’s 3.0% annualized growth, revised up from an initial 2.8%, set a high bar for this quarter, with growth expectations once again at 3.0%. Should the GDP data exceed or fall short of this forecast, it could prompt a reaction in the currency markets, shaping the EUR/USD outlook as traders respond to potential shifts in economic sentiment.

Friday’s US nonfarm payrolls data will be a highly anticipated release for traders. Last month’s surprisingly strong employment numbers led to a significant dollar rally, causing the market to rethink the potential for additional aggressive rate cuts by the Fed. Should Friday’s report confirm continued labour market resilience, expectations for future rate cuts may decrease further. This shift would likely impact the EUR/USD outlook by strengthening the US dollar, particularly if traders interpret solid employment data as a sign of economic stability. The opposite is obviously also true, but with the upcoming US election risk in the week ahead, and data-driven weakness for the US dollar could be short-lived.

Eurozone CPI and GDP among Eurozone data to watch

From the Eurozone, we will have German CPI on Wednesday morning, which should further influence the near-term direction of the EUR/USD before the inflation data for the Eurozone is released later one day later along with German retail sales. GDP data from the euro area is also on Wednesday. But with the focus on US data and election, any eurozone data should only have a mild impact on the FX markets.

US election: What a potential Trump Victory mean for EUR/USD outlook

In a scenario where Donald Trump wins the US presidential election and Republicans secure control in Congress, the EUR/USD outlook could face significant downward pressure. Trump's agenda includes tax cuts and stricter immigration controls, which he has vowed to implement swiftly. Tax cuts are typically both inflationary and supportive of economic growth, while tighter immigration policies could lead to labor scarcity, potentially driving up wages. Together, these factors could create a more robust US economy, strengthening the dollar. More to the point, Trump may also reintroduce or expand trade tariffs, including those affecting the Eurozone. These tariffs could have a dual impact: weakening Eurozone exports (putting downward pressure on the euro) and driving inflation in the US as businesses face rising import costs. With US inflation potentially rising under this scenario, the EUR/USD could see additional bearish pressure as traders anticipate tighter monetary conditions to manage inflationary risks.

Here is a full guide on how US election will impact the EUR/USD and forex markets (click on the link), offering insights on how traders can leverage the election dynamics to enhance their trading strategies before, during, and after the November 5 vote.

Technical EUR/USD outlook: key levels to watch

Source: TradingVew.com

The technical outlook on the EUR/USD remains bearish as things stand. This is because price continues to remain within a structure of lower lows and lower highs. Additionally, the EUR/USD has recently broken and now held below the 200-day moving average. The shorter term 21 day moving average is also pointing lower and is above market. In other words, the trend is objectively bearish.

Given the above observation, it makes more sense to look for bearish setups to emerge near resistance than bullish ones near support, from a trading point of view. A case in point - Thursday’s bullish engulfing candle that was formed near 1.0780 support (where price had made a low back in August), has so far failed to encourage the bulls from stepping in meaningfully. We have not seen any further upside follow through above the high of Thursday’s range. Instead, the EUR/USD has drifted lower from 1.0835 resistance in the last few days and is now potentially on the verge of making another lower low. This goes to show the importance of selecting the correct signal: Aligning the candle patterns in the direction of the trend tend to provide better trading signals.

Anyway, for as long as the EUR/USD does not break back above the 200-day average, near 1.0870 resistance, the path of least resistance remains to the downside. As such, the technical EUR/USD outlook remains bearish. The next downside target for me is around 1.0700 from here but should this week’s US data trounce expectations or Trump is elected as US president next week then we could potentially be talking about the 1.05 handle soon.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.