Yesterday, the euro's trading session unfolded in two distinct phases. Before noon, it rose steadily, reaching a high of almost 1.1230. However, US economic data restored demand for the dollar in the second half of the day, erasing all of the euro's gains. By this morning, the pair had returned to approximately the level where it stood on Monday before the release of European economic data and was trading around 1.1194. Overnight, it declined to 1.1178 but held above that level and recovered slightly. Thus, the dollar continues to put pressure on the euro, although it has not yet triggered a deeper decline.

Yesterday, preliminary final figures for eurozone manufacturing activity were released in the first half of the day. This is the Purchasing Managers' Index, known as the PMI. It is based on a survey of purchasing managers, and a reading above 50 indicates that the sector is expanding. The index came in at 52.7, compared with expectations of 52.4. Although the difference was small, the result exceeded forecasts, suggesting that the regional economy is holding up better than traders had anticipated. Germany's retail sector delivered a weaker performance. Retail sales fell by 2.0% in September, although analysts had expected an increase. This indicator reflects consumers' willingness to spend, and Germany remains the largest economy in the region, so this decline should not be overlooked. However, against the backdrop of stronger manufacturing data, the market largely ignored it.

US economic data was released in the second half of the day, shifting market sentiment. The manufacturing ISM index came in at 55.5, compared with a forecast of 54.5. This is also a survey-based indicator, but it focuses on US factories and reflects orders, output, and employment at manufacturing companies. The higher the reading, the stronger the US economy appears, giving the Fed more reason to continue tightening monetary policy. The Fed raised interest rates in September, and the market expects another increase in December. The strong ISM reading reinforced these expectations and helped the dollar recover some of its losses. Construction spending came in weaker, declining by 1.9%, as did the S&P Global business activity index, but neither was strong enough to offset the impact of the ISM report. As a result, the euro's morning gains were erased, and the pair returned to its starting point.

Today, the European economic calendar is empty ahead of the US trading session. No significant eurozone data is scheduled, even though inflation, business activity, and labor market indicators typically shape expectations regarding the ECB's interest rate and provide clues about the euro's direction. In the absence of such data, traders have little reason to adjust their positions, leaving EUR/USD increasingly dependent on external factors.

The main event of the day will be the US midterm elections. These elections take place halfway through a presidential term, and this time all seats in the House of Representatives and approximately one-third of the Senate are being contested. The results will determine the balance of power in Congress and, consequently, influence decisions regarding the budget, taxes, and government spending.

Momentum

The strategy is based on a simple rule. It is not enough for the price to briefly touch a level. It must break through and consolidate beyond it. Only then does entering a trade in the direction of the breakout make sense.

For the euro, buying opportunities are considered above 1.1200, with targets at 1.1229 and 1.1254, while selling opportunities are considered below 1.1172, with targets at 1.1138 and 1.1108. The price is currently trapped between the two entry levels and is only six points below the upper one. However, the bullish scenario appears less attractive. Overnight, the pair rose only to 1.1198 before reversing, while yesterday's high coincided with the first target at 1.1229, and all of those gains were subsequently erased following the ISM release. This means that buyers have already pushed the pair above 1.1200 but failed to hold those gains. Today, the euro has no domestic catalysts to support it, while the elections are likely to favor the dollar.

The bearish scenario is more consistent with the current market environment. The pair has already approached the 1.1178 area and rebounded. The 1.1172 level is just six points lower, and increased uncertainty ahead of the elections could lead to a break below it. However, there is no reason to rush. Without fresh economic data, a breakout before the US session could easily prove false. Therefore, the preferred approach is to wait for consolidation below 1.1172 rather than sell on the first test. The US session could generate a noticeable impulse, while the stronger directional move is more likely to emerge overnight, once the election results become known.

Mean Reversion

For the euro, the key resistance level is 1.1205. The idea is that the price breaks above 1.1200 but fails to find support and then falls back below it. In that case, selling opportunities can be considered, with a stop-loss order placed above the high of the false breakout. This level is only five pips above the breakout point at 1.1200, so beginners need to exercise particular caution. Given how close the levels are, a single test is not enough to distinguish a genuine breakout from a false one. If the price breaks above 1.1200, reaches 1.1205, and consolidates above that level, this is a genuine breakout, and selling should be avoided. However, if the price only briefly enters the zone and then returns below 1.1200, a reversal back into the previous range has occurred. These two scenarios can unfold within just a few minutes, so it is better to wait rather than react to the initial price movement.

This scenario is more appealing because the European economic calendar is empty ahead of the US session. Without new economic data, a sharp upward move lacks fundamental support and is therefore more likely to lose momentum. In addition, the elections are providing support for the dollar.

The key level below the market is 1.1175, and the strategy works in the opposite direction. The pair breaks below this level but fails to remain there and moves back above it. In this case, buying opportunities can be considered, with a stop-loss order placed below the low of the false breakout. This level is only three points above the breakout point at 1.1172, so even greater caution is required. If the price falls below 1.1175, reaches 1.1172, and remains below it, this signals the beginning of a genuine decline, and buying should be avoided. However, if the price briefly enters this narrow zone and immediately moves back above 1.1175, buying becomes a valid option.

Nevertheless, the overall market environment is unfavorable for this scenario, as uncertainty ahead of the elections typically supports the dollar. Therefore, selling opportunities near the upper level remains the priority, while buying near the lower level should be avoided unless a clear recovery above the level is confirmed.