EURUSD, jumps to session highs at 1.0050 as the US dollar dips

• The euro bounces up and hits session highs at 1.0050.
• The US dollar pulls back with all eyes on the US elections.
• EURUSD is aiming for 1.0100 – SocGen.

The euro has squeezed higher on Tuesday’s US trading to hit session highs at 1.0550 with the US dollar dropping suddenly across the board. From a wider perspective, however, the pair has been moving without a clear direction, both sides of the parity level, with the investors adopting a more cautious stance.

The dollar dives with all eyes on the US mid-term elections

Appetite for risk waned on Tuesday as the markets await the outcome of the US mid-term elections. The definitive results of the elections are likely to draw out for some days but initial polls are suggesting a Republican victory that would trigger a Congress gridlock.

The foreseen Republican victory is likely to complicate the approval of the fiscal stimulus measures expected to be launched next year, which would ease pressure on the Fed to ramp up interest rate hikes.

The US dollar has rallied across the board this year, appreciating beyond 10% against the euro, fuelled by the Federal Reserve’s aggressive monetary tightening cycle. With market developments feeding speculation about the end of that cycle, the US dollar might start to give away gains.

EURUSD: aiming to 1.0100 – SocGen

Currency analysts at Société Générale see the pair aiming for October’s peak, at 1.0100: “Daily MACD has been posting positive divergence since July and has now entered positive territory denoting downward momentum is gradually receding. However, the pair has to establish itself beyond 1.0100 to affirm an extended bounce towards 1.0190 and graphical levels of 1.0290/1.0360.” 

Technical levels to watch