EUR/USD – Smart Money Analysis: The Euro Remains Under Significant Pressure

EUR/USD made another reversal in favor of the euro toward the end of last week after liquidity was swept below the latest swing low. This created technical grounds for a recovery in the European currency, and the expectation remains that the bulls will eventually launch a sustained advance. In this view, the bears have maintained their pressure for too long and with too little resistance, while the news flow over recent months has not been so one-sided as to justify gains in the US dollar alone. The euro deserves at least a corrective pullback. It also has a clear potential target: imbalance 24, from which the bearish impulse could resume and a new sell signal could form.

The results of the US congressional elections will be known as early as tomorrow, and traders appear to be interpreting even this event in favor of the US dollar. Donald Trump's ruling party is likely to lose the elections, potentially leading to changes in US policy. However, the nature of those changes remains uncertain. Will they be positive or negative? The dollar's persistent reluctance to decline suggests that the market views a possible Democratic victory favorably. As a result, traders are still looking for reasons to buy the US dollar, even this week.

It is worth recalling that one of the main reasons for the dollar's appreciation over the past two months has been the Federal Reserve's hawkish stance. However, the Fed's position is not as hawkish as many believe. At the latest meeting, only two FOMC members voted for tighter policy, while the Fed itself adopted a neutral decision that did not justify the dollar's dominance over the euro in recent weeks. The US economy grew more strongly than expected in the third quarter, but the eurozone economy also outperformed forecasts. The European Central Bank left interest rates unchanged and is also expected to raise them in December, just as the Fed is. At present, economic conditions in the eurozone and the United States are broadly similar.

At this stage, there are no clear signs that the bearish advance is coming to an end. Imbalance 24 remains relevant, and the price may react to it, creating a new sell signal. The bears have advanced too far, and stopping their momentum will now be difficult. The bulls, meanwhile, need to invalidate imbalance 24 and establish bullish patterns before a meaningful recovery can be expected. This would require a sharp upward move in the euro, but so far the bulls have demonstrated little more than inertia.

In September, the FOMC raised interest rates and signaled its readiness to tighten monetary policy, which proved sufficient to trigger a broad bearish advance that has continued to this day. However, despite the Fed's September tightening and the possibility of another move in December, it would be incorrect to conclude that the euro has received no positive news during this period.

Overall, the fundamental backdrop still appears to favor the bulls. Although the Fed has adopted a tighter monetary policy stance, this is not the only factor determining exchange rates. The eurozone also faces challenges, but the key point is that problems exist everywhere, while the euro is the currency that continues to decline. Both central banks are tightening monetary policy, yet only the US dollar is appreciating. Nevertheless, a recovery in the euro should not be anticipated until bullish signals emerge. Buying the European currency in advance is also not advisable.

The current chart structure indicates that the bearish impulse remains firmly in place, with no clear alternative scenario yet established. Imbalance 24 is the main active pattern and could be tested in the near future. The bulls' current opportunities are limited to liquidity sweeps below obvious swing lows. However, a liquidity sweep alone is not sufficient to justify opening buy positions.

The economic news flow on Tuesday was relatively weak. The US elections officially began, but the results will not be available before tomorrow at the earliest. The only major release today was the US JOLTS report on job openings, which was unlikely to attract significant trader attention from the outset.

There are still numerous reasons for the bulls to launch an advance in 2026. Structurally and globally, Trump's policy—which contributed to the substantial decline in the US dollar last year—has not changed. At present, there are no significant factors providing support for the US currency, despite the FOMC's hawkish stance. Geopolitical developments and the tense situation in Europe are currently weighing on the euro.

The economic calendar for November 4 contains at least four important releases. The economic news flow could have a significant impact on market sentiment throughout Wednesday.

In this view, the pair remains in the process of forming a bullish trend that has been undergoing a corrective pause for an entire year. The fundamental backdrop shifted sharply in favor of the bears eight months ago, but the broader trend, which has been in place for four years, cannot yet be considered invalidated or complete.

The bulls may resume their advance before the end of the year. However, their current opportunities are limited to the June low of 1.1066 from last year and the low of 1.1114 established several weeks ago, both of which could be targeted in liquidity sweeps. A new sell signal could also form within imbalance 24.