One factor supporting the US dollar was the expectation that tensions in the Middle East would escalate after the US midterm elections. Against this backdrop, the sharp decline in Brent crude prices came as a major surprise for the EUR/USD pair. Let’s take a closer look at the situation and develop a trading plan.
The article covers the following subjects:
Major Takeaways
- Brent plunged amid rumors of a Middle East peace deal.
- The PMI points to a strong US economy.
- The US dollar’s reaction to midterm elections is mixed.
- A breakout strategy in the 1.1150–1.1240 range remains relevant.
Weekly Fundamental Forecast for Dollar
Si vis pacem, para bellum. As the US geared up for the midterm elections, oil prices hovered near their six-month highs amid fears of an escalation of the conflict in the Middle East immediately following the midterms. Concerns about the Brent rally were one of the factors supporting the US dollar. However, ahead of the vote, Brent crude plummeted, prompting a surge in the EURUSD pair.
Brent Crude Daily Change
Source: Bloomberg.
Brent recorded its steepest single-day decline of 2026 after Donald Trump announced that he would make an important statement regarding Iran. The sell-off, fueled by rumors of diplomatic efforts to resolve the Middle East crisis, was comparable to the plunge on March 10. Then, the US administration suggested the war would soon end. In early November, Tehran itself began signaling a willingness to pursue peace, triggering another sharp decline in oil prices.
Washington created the threat of further escalation, which Tehran could no longer afford to ignore. Meanwhile, exports from Saudi Arabia, the UAE, Iraq, and Kuwait rose by 10% in October to 15.53 million bpd, returning to levels last seen at the beginning of the year. By contrast, Iranian oil shipments remained at zero due to the US blockade.
As a result, investors began pricing in the possibility of a diplomatic settlement, sending Brent crude prices and US Treasury yields sharply lower. The EUR/USD pair briefly approached the 1.1240 level before retreating. However, the rumors may not prove accurate.
WTI Futures and 10-Year Treasury Yield
Source: Bloomberg.
On the macroeconomic front, the US dollar received support. The ISM Manufacturing PMI has been expanding for the 10th consecutive month. Its October reading was the second-highest in four years and exceeded all but one of Bloomberg’s forecasts. The US economy is running at full speed, allowing EUR/USD bears to recoup some losses.
Investors are eagerly awaiting the midterm elections. Barclays points out that the previous three midterm elections resulted in a divided Congress, which helps explain why yields on 10-year US Treasury bonds have barely moved. If Democrats gain control of both the House of Representatives and the Senate, the dollar’s reaction could be mixed.
Donald Trump would likely shift his focus from domestic to foreign policy, and his controversial decisions have more often weighed on the greenback than supported it. By contrast, Standard Chartered argues that Democratic legislative initiatives could widen the budget deficit, pushing Treasury yields higher and supporting the US dollar.
The key factor underpinning the greenback’s stability has been the expectation of an escalation in the Middle East following the midterm elections. However, the sharp decline in Brent crude prices is now complicating this outlook.
Weekly Trading Plan for EUR/USD
Until the EUR/USD breaks out of the 1.1150–1.1240 range, it will be difficult to determine the pair’s next direction. In these conditions, breakout trading strategies are becoming increasingly relevant.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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