On Tuesday, the EUR/USD currency pair continued to struggle to break above the 20-day SMA, which is located near the psychological level of 1.1200. Market participants are showing increased caution as they await the results of the US midterm elections, which could significantly affect the balance of power in Congress.

Preliminary forecasts point to a likely Democratic majority in the House of Representatives. According to experts, an unexpected Republican victory could trigger a rally in US Treasury yields and, consequently, strengthen the US dollar. In any case, the election outcome could cause short-term market volatility and provide new momentum for the EUR/USD pair. Against this backdrop, US macroeconomic data released on Monday exceeded analysts' expectations. Together with expectations that the Federal Reserve will maintain its hawkish rhetoric, these developments are supporting the US dollar.

The ISM Manufacturing Purchasing Managers' Index (PMI) rose to 55.5 points in October 2026, up from 54.5 points in the previous month. This result confirms the expansion of the manufacturing sector for the tenth consecutive month. Moreover, according to CME Group's FedWatch tool, traders estimate the probability of a Federal Reserve interest rate hike in December this year at more than 70%. This factor provides substantial support for the US dollar.

Nevertheless, hopes for a diplomatic resolution to tensions between the United States and Iran could limit the US dollar's upward potential and, consequently, support the EUR/USD pair. The previous day, US President Donald Trump expressed the view that Iran was interested in reaching an agreement to end the conflict and that such an agreement was entirely achievable. In addition, Iranian Foreign Minister Abbas Araghchi reported intensive consultations involving international mediators. Despite these developments, several days of negotiations between the Iranian side and Qatari mediators failed to produce a significant breakthrough, even after the proposed terms were revised. As a result, the geopolitical risk premium remains in place.

This factor may make traders reluctant to open aggressive short positions in the US dollar. Combined with persistent concerns about France's growing debt burden and the potential for political paralysis, it is likely to limit the EUR/USD pair's further upward potential.

Ahead of the release of key economic data on Wednesday, including preliminary eurozone inflation figures and the US ISM Services PMI, the market is awaiting today's US JOLTS Job Openings report. This release could also create trading opportunities for the EUR/USD pair and act as a catalyst for further price movements. However, the main event of the week remains Friday's US Nonfarm Payrolls (NFP) report, which is expected to attract the greatest attention from investors.

Given the current decline from the August highs and the pair's consolidation within an established trading range over the past month, the current phase can be characterized as a bearish consolidation. Furthermore, on the daily chart, the pair is trading below the 20-period simple moving average (SMA) and all other key moving averages, confirming selling pressure.

Nevertheless, confirmation of the bearish scenario and the conditions for a more significant decline would require a decisive break below the lower boundary of the current trading range, located near the psychologically important 1.1100 level. The nearest resistance above the current price is the 20-day SMA, while the upper boundary of the range is at 1.1267. A break above this barrier is necessary to ease selling pressure and establish a more positive outlook for the pair. However, as long as the oscillators remain in negative territory, the bears retain the advantage.