EUR/USD: US election outcome is creating volatility on the forex

Very high volatility levels on the foreign exchange market right now, where the EUR is on a rollercoaster ride against the USD, while remaining below the pivotal threshold of $1.1745/$1.1750, in a nervous atmosphere, with flashbacks to 2016, where polling institutes were on average heavily mistaken about their expectations regarding the outcome of the US presidential election.

The scenario feared by the markets is coming true... Namely, the spectre of a disputed US presidential election that resurfaces, to the great displeasure of the markets. The election promised to Joe Biden is indeed far from being a foregone conclusion. The results, still being counted, are very close as we write these lines, notably because of the victory of Trump in Florida, Iowa, Ohia and Texas, four pivotal "swing states", which between them have no less than 91 grand electors...

John Plassard (Mirabaud): "At the time of writing, there is a very high probability that President Trump will win the American presidential elections and therefore remain in place in the White House. If the House of Representatives remains Democratic, the Senate could also remain Republican. If that were to be the case, we could see, at least in the short term, large demonstrations and a high degree of volatility in the markets".

Alexander Bardez, head of analysis at IG France says: "The scenario of a challenge to the election by the two candidates would be the worst scenario for the financial markets because it would slow down the implementation of important measures. It would also add to the uncertainty concerning the foreign policy of the United States, particularly with regard to Europe and China on trade issues in particular".

According to the latest count, Joe Biden has 234 electors, compared to 214 for Donald Trump. It takes at least 270 (an absolute majority) to win the election.

In terms of Wednesday's statistic releases, the final data of the PMI services activity indicator for the Euro Zone last month came out significantly below the first estimates, at 51.5, while remaining above the 50 points bar which separates it from construction, a contraction from an expansion of the concerned part of activity. On the other hand, the producer price index, published on Wednesday, didn't deviate from the consensus.

As of right now, the EUR/USD pair is trading at  $1.1694.

KEY CHART ELEMENTS
Since Tuesday, the violent upsurge in volatility has ultimately not changed the situation. The chart and technical configuration remains tricky below the pivotal threshold of $1.1745/$1.1750. Forex traders will prefer to stay out of the pair for the time being, until volatility cools down.

MEDIUM TERM FORECAST
In view of the key chart factors we have mentioned, our opinion is neutral in the medium term on the pair.

We will maintain this neutral view as long as EUR/USD rates are positioned between support at $1.1570 and resistance at $1.1745.