The EUR/USD pair is taking a breather on Wednesday, consolidating the previous weekly gain at the 1.0050 area after a three-day rally that saw the pair accumulating over 300 pips.
The euro reached a two-month high of 1.0096 against the dollar on Tuesday as the U.S. currency weakened, weighed by a pullback in Treasury yields, while American citizens went to the polls for the midterm elections.
At the time of writing, the EUR/US pair is trading at the 1.0055 zone, slightly below its opening price but over 3% above last week’s lows before the U.S. nonfarm payrolls data.
Recent USD weakness comes on the back of expectations of a Fed pivot – slowing down the pace of tightening after four consecutive meetings hiking 75 bps.
Focus now turns to October’s CPI data, which will be released on Thursday and could trigger directional moves in the EUR/USD as investors await the outcome of the midterm elections.
Ahead of the results, which could take weeks, polls point to a majority of Republicans in the House of Representatives and a close call in the Senate.
From a technical perspective, the EUR/USD pair retains the short-term bullish bias according to indicators on the daily chart. At the same time, the price accomplished a daily close above the 100-day SMA, which is a positive signal.
If the pair breaks above the 1.0100 area, the next bullish targets are at 1.0197, September monthly high, and 1.0368, August monthly high. On the other hand, a loss of the 1.0030 area would expose the 20-day SMA at 0.9900 and risk a retest of last week’s lows at the 0.9730 area.