While the entire market was burying the seemingly falling euro, the EUR / USD bulls stood up and responded powerfully seriously counting on a correction to $1.15-1.16. At first, it looked like an accident amid the fall of the S&P 500 and the increase in the number of COVID-19 cases in Europe to record highs. Nevertheless, strong data on German business activity in the manufacturing sector, which soared to its highest level in the last 2.5 years, put everything in its place. The leader of the European economy is not going to lose heart because of the pandemic, and if so, then it is premature to talk about divergences in the monetary policy of the Fed and the ECB and in economic growth in favor of the US dollar.

The higher Joe Biden's rating rises, the worse the situation turns out for the greenback. The dollar is sold for several reasons. First, the "blue wave" will lead to a large-scale fiscal stimulus, money will need to be borrowed somewhere, and the growth of foreign demand for increased volumes of bond issues is possible only in two cases: with a weak currency, and at high real rates of the debt market. The Fed will not allow the latter.

Second, the degree of protectionism under Biden is likely to decrease, which will improve the state of international trade, create a tailwind for the export-oriented economy of the eurozone and lead to an increase in the double US deficit, which will negatively affect the dollar.

Trends in the real trade-weighted dollar rate and the US current account:

Finally, an unconditional victory of the Democrats in the elections will significantly reduce political uncertainty, thus depriving the dollar of an important trump card - the demand for safe-haven assets.

Dynamics of the global uncertainty index and the trade-weighted US dollar exchange rate:

Thus, the long-term prospects of the dollar look bearish, and at the slightest sign of positive from Germany and the Eurozone, investors are happy to buy EUR / USD, which was demonstrated by the week to 23 October.

At the end of the second month of spring, traders' attention will be focused on the release of data on US and German GDP for the third quarter, on the ECB meeting, on the negotiations between Democrats and Republicans on the fiscal stimulus, Brexit, as well as the ratings of Donald Trump and Joe Biden. Trump has recouped his lag a little, while current events have a lot in common with 2016, which forces us to take into account the risks of an unexpected Republican victory.

Dynamics of ratings of Trump and his rivals:

If Trump can maintain his seat, the markets will be shaken to the core, which is likely to result in a collapse in the S&P 500 and a strengthening of the US dollar. In this regard, EUR / USD bulls need to be doubly careful and use stop orders.

Technically, a breakout by the main currency pair of resistances at 1.1865 and 1.189 will be a signal for opening long positions and will increase the risks of target realization by 88.6% and 161.8% according to the "Bat" and "Crab" harmonic trading patterns. They are located near 1.197 and 1.229.

EUR / USD daily chart: