The Middle East conflict is commonly called the largest energy crisis in history. That is only half true, because oil is only half the story, and for the dollar what matters more is what happens at US polling stations.

Rates markets give Democrats a high chance of victory in the November 3 elections and possible control of Congress. Since 1976, the greenback's reaction to midterm results has depended on whether Democrats win only the House or also the Senate. In the first case, it recovered; in the second, it sold off.

Dynamics of the probability of Democratic control of Congress

Two contradictory drivers complicate the assessment and can operate sequentially. Immediately after voting, investors will look for signs of a renewed conflict in Iran, which will push EUR/USD down like a magnet attracting capital in moments of alarm. But the effect could quickly fade if it turns into TACO, the common joke that Donald Trump backs off threats at the last moment.

The Arab states of the Persian Gulf fear that a new US and Israeli strike on a better-prepared Iran could ignite a more destructive regional war. Donald Trump ruled out strikes before the vote but did not close the door to new attacks while talks remain at an impasse.

The war itself has turned out to be more of a benefit than a threat for the US. Thanks to the shale revolution, American gas consumers have barely felt the energy crisis. While Europeans and Asians pay more than $30 per million BTU, Americans pay around $3. For a country that depended on fuel imports for decades, this is a trump card for the dollar.

But Deutsche Bank warns that the dollar's status as a safe-haven asset should not be taken for granted during a market correction on the theme of artificial intelligence. Therefore, a move down in EUR/USD may not be as durable as it seems. They remind us that foreigners financed almost the entire US current-account deficit through rising equity prices rather than new purchases. In a stock-market crash, the usual inverse relationship between stocks and the dollar may flip, amplifying declines on both fronts at once.

The takeaway from these two narratives is this. The vote and Iran can give the dollar a short burst of support, but it will be based on the old market reflex to run into the greenback at any sign of trouble. If bond yields and US equities begin to fall together, that will signal the reflex has broken, and a short EUR/USD trade could be the last.

Technically, on the daily chart, EUR/USD is attempting a "double bottom" pattern recovery. Consolidation of quotes above fair value at 1.1195 is a good sign for buyers. As long as the major currency pair trades above that level, the emphasis is on buying.