The EUR/USD outlook shows a frail dollar as markets unwind the Trump trade. Recent polls have shown a lower likelihood of a Trump win. Meanwhile, they have shown Kamala leading in places like Iowa, a Republican stronghold. Nevertheless, the race remains tight. 

In the beginning, bets favored a Trump win, which boosted the dollar. However, in recent days, Kamala Harris has become more popular, leading to an unwinding of the Trump trade. Trump has proposed several policy changes that would affect tariffs and taxes. Moreover, experts believe these changes would increase inflation, boosting the dollar. 

On the other hand, Kamala is more likely to continue with policies already in place. Therefore, the Fed would continue lowering borrowing costs, hurting the greenback. A weak dollar allows the euro to climb. Furthermore, the tight race has created a lot of uncertainty that could increase volatility after the election results. 

Meanwhile, market participants are also awaiting the FOMC policy meeting. The Fed will meet after the election results and markets have priced in a 25-bps cut. However, data last week revealed an unexpected drop in job growth that could change the outlook for future rate cuts.

Initially, policymakers had assumed a more cautious tone, with some forecasting only one more rate cut this year. Therefore, traders will watch the messaging for clues on whether the central bank will cut rates in December. A cautious tone will boost the dollar. On the other hand, if Powell strikes a dovish tone, rate cut expectations will increase, pushing the greenback lower.

EUR/USD key events today

• US ISM services PMI
• US presidential election
• US congressional elections

EUR/USD technical outlook: 1.0900 resistance poses challenge

(Click on image to enlarge)

EUR/USD 4-hour chart

On the technical side, the EUR/USD price has risen above the 30-SMA in a new bullish trend. At the same time, the RSI trades above 50, indicating strong bullish momentum. However, the price faces a strong hurdle at the 1.0900 resistance level. 

A surge in momentum would push the price beyond this level to make a new high in the uptrend. On the other hand, if the resistance holds firm, the price will fall to retest the SMA support. A break below the SMA would clear the path to the 1.0800 support level.

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