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07.11.202403:33 Forex Analysis & Reviews: Overview of EUR/USD on November 7; Donald Trump Wins, the Dollar Strengthens

Exchange Rates 07.11.2024 analysis

The EUR/USD currency pair fell by approximately 250 pips during Wednesday's session. The pair's decline began overnight and continued throughout the day. There's little mystery as to why this happened—the catalyst for the U.S. dollar's surge could only be one thing: the U.S. presidential election results and Donald Trump's likely victory. More accurately, the strong market movement was driven by the election itself. We have noted several times that the dollar might perform better under Trump than Kamala Harris. However, we didn't anticipate the dollar rising by 2.5 cents in a single day due to Trump's win. In other words, forecasting such a movement was nearly impossible.

However, the movement itself isn't entirely surprising. First, the euro remains overbought while the dollar is oversold—something we've highlighted since early 2024. Second, the global trend remains bearish for the EUR/USD pair, as we've been saying throughout this year. Third, the market has already priced in two years of Federal Reserve monetary easing. Now that the Fed has begun rate cuts, there's no longer any reason for the dollar to decline. Fourth, we've consistently pointed out that any growth in the EUR/USD pair is merely a correction, which can end at any time. Thus, while the sharp dollar rally on Wednesday was unpredictable, a medium-term decline for the EUR/USD pair was expected.

The dollar continues to gain strength while the euro weakens. Today, the pair may bounce upward following the Fed meeting results, but all the above factors will remain in play regardless of the Fed's decision or Jerome Powell's rhetoric. The U.S. dollar might see short-term weakening if the Fed adopts a more dovish stance in light of the recent weak NonFarm Payrolls report. However, we continue to anticipate a stronger dollar overall.

As for Trump's victory, there's little to say just yet. Trump's win was decisive, but he won't officially be declared president until January 5. Until then, Kamala Harris's team may file appeals against the election results, potentially leading to recounts in some states. However, as it stands, Trump's victory seems undisputed.

It appears the U.S. electorate followed the same pattern as four years ago: back then, they voted for anyone but Trump. Now, they seem willing to vote even for Trump as long as it's not Biden. While Biden dropped out of the presidential race, many viewed Kamala Harris as a "replacement for Biden" rather than a strong politician in her own right. In any case, Americans were dissatisfied with Democratic leadership. Now, they'll experience Republican governance, as the GOP also won control of the Senate.

Exchange Rates 07.11.2024 analysis

The EUR/USD pair's average volatility over the past five trading days is 96 pips, indicating "high" volatility. On Thursday, November 7, we expect the pair to trade within the range of 1.0653 to 1.0845. The higher linear regression channel points downward, confirming the continuation of the global downtrend. The CCI indicator has entered oversold territory, signaling the potential start of a new corrective phase.

Nearest Support Levels:

  • S1: 1.0681
  • S2: 1.0620

Nearest Resistance Levels:

  • R1: 1.0742
  • R2: 1.0803
  • R3: 1.0864

Trading Recommendations:

The EUR/USD pair has resumed its downward movement but may initiate a new corrective wave soon. In recent weeks, we've maintained our medium-term bearish outlook for the euro, fully supporting the downtrend. The market may have already priced in most of the Fed's future rate cuts. If so, the dollar has little reason to decline further. Short positions remain valid with targets at 1.0681 and 1.0620 as long as the price stays below the moving average. For traders using "pure" technical analysis, long positions could be considered if the price rises above the moving average, targeting 1.0925 and 1.0986.

Explanation of Illustrations:

Linear Regression Channels help determine the current trend. If both channels are aligned, it indicates a strong trend.

Moving Average Line (settings: 20,0, smoothed) defines the short-term trend and guides the trading direction.

Murray Levels act as target levels for movements and corrections.

Volatility Levels (red lines) represent the likely price range for the pair over the next 24 hours based on current volatility readings.

CCI Indicator: If it enters the oversold region (below -250) or overbought region (above +250), it signals an impending trend reversal in the opposite direction.

*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.

Paolo Greco,
Analytical expert of InstaSpot
© 2007-2024
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