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 Financial markets are in a holding pattern, with traders hesitant to commit to specific positions. With an exceptionally tight US presidential race, many are leaning towards options strategies instead of outright long or short positions. For instance, Bloomberg reports that some hedge funds are opting for call options on currencies like the EUR and AUD, anticipating a potential USD drop if Kamala Harris wins. However, given the closeness of the polls, even options trading presents high risks for some. This sentiment is reflected in the EUR/USD’s one-week implied volatility, which has climbed to its highest level since March of last year. Additionally, Trump stock has been exceptionally volatile. This environment of uncertainty has dampened risk appetite, impacting stocks and leading to significant Bitcoin ETF outflows of nearly $580 million on Monday. As implied volatility surges, the EUR/USD pair stands poised for a substantial move, with one side inevitably forced to realign based on election results.
 US Election Dominates the EUR/USD SceneOver recent days, the EUR/USD has benefited from several macroeconomic developments. Key factors include the European Central Bank’s resistance to calls for a 50-basis point rate cut in December, a softer-than-expected US jobs report, and polls hinting that Harris may be outperforming expectations in Iowa, a crucial swing state.Until early this week, markets seemed to price in a Trump victory, though Harris’s recent gains have made this outcome less certain, effectively turning the race into a toss-up. Although polls can be misleading, a close race complicates the case for any firm directional bets on the dollar or stock markets in the near term.Trump’s policies on issues like taxes, tariffs, and immigration are generally seen as inflationary, explaining the previous surge in US Treasury yields and the dollar’s strength up until recently. This week, however, Harris’s improving odds on several prediction sites—despite Polymarket still suggesting Trump as the likely winner—have shifted sentiment slightly. Her lead in Iowa, a traditionally red-leaning state, has added to her campaign’s momentum.As a result, market sentiment has discounted some tariff-related risks, benefiting the currencies of major US trading partners. Should Harris secure the presidency, the dollar could see further downside. Conversely, a Trump victory could weaken currencies like the yuan, euro, Canadian dollar, and Mexican peso due to the potential threat of widespread tariffs.
 Potential EUR/USD Scenarios Based on Election ResultsWith voting now underway, results from key swing states could start emerging between 02:00 and 03:00 GMT on Wednesday. A Trump win might lead to a decline in the EUR/USD outlook, potentially driving the pair down to 1.0700, with a full Republican sweep possibly pushing it towards 1.0500. Alternatively, a Harris victory could send the EUR/USD above the 1.1000 mark.
 ISM Services PMI in the Background Amid Election FocusToday’s US economic calendar highlights the ISM Services PMI for October, scheduled for release at 15:00 GMT. Expectations are for a slight weakening from the previous reading of 54.9. Equally critical will be the employment subcomponent, especially as the Fed’s focus has shifted more towards employment metrics. This report serves as the last significant data release before the Fed’s policy decision on Thursday. However, questions remain regarding whether the election results will be known by then. If the election outcome is clear, the Fed could provide stronger guidance on future rates; otherwise, its messaging may remain data-dependent for the December meeting and beyond.
 Technical analysis and trade ideas Source: TradingView.comThe EUR/USD has rebounded after finding support at a bullish trend line established last October. As of this writing, it’s testing a critical resistance level around 1.0900, an area that previously acted as support. Should the pair break through this level, the next resistance levels to watch are 1.0950 and, subsequently, the psychological barrier of 1.1000. On the downside, the immediate support for bulls is between 1.0825 and 1.0840, followed by the trend line and last week’s support range of 1.0770 to 1.0800. A decisive break below this support zone could open the door to further technical selling, possibly driving the pair down to the 1.0700 region, and much lower in the event of a Red Sweep in US presidential election.More By This Author:US Stocks Drop Ahead Of Key Earnings, Data And Election GBP/USD: UK Budget, US Election, And Key Data On The HorizonS&P 500: Stocks Rebound On Positive Earnings Amid US Election Uncertainty