Today we shall take a look at the EUR/USD currency pair. The pair ended October at a five-week minimum just above the critical support level at 1.16 but has since then taken off. At present, the rate is nearing the August maximums close to 1.19 and seems poised for more growth.
Over the last couple of days, the euro has been able to appreciate against the dollar significantly. This is in large part due to the presidential elections in the United States. It took close to five days for any conclusive results, and this uncertainty weakened the dollar last week. The European Union’s relationship with the United States will be in focus this week. The EU has to decide by tomorrow whether to retaliate against tariffs that Trump imposed previously. With Trump on his way out, the bloc may expect that Joe Biden will undo most, if not all, of Donald Trump’s work in the near future. Nevertheless, if the EU decides to impose tariffs after all, global sentiment will be harmed further. Many factors against the euro also remain, such as the spread of the coronavirus across the continent, and the upcoming loosening of monetary policy by the European Central Bank in December. We expect a more or less quiet day for the euro today, though things may be different tomorrow with the publication of the ZEW Economic Sentiment Index in both Germany and the eurozone as a whole.
As for the US dollar, its path remains unclear for now. Yes, the USD is a safe haven and thanks to the pandemic it remains in high demand. However, the election dispute in the United States is preventing the dollar from shining to its fullest extent. Joe Biden has been officially proclaimed the President-elect, with 4 million more votes than Trump in total, as well as more electoral votes thanks to flipping Pennsylvania and Georgia. Still, Trump’s campaign has asked for a couple of states to do a recount, and has taken other legal action against perceived irregularities during the election, though there is no evidence of voter fraud. Donald Trump has also said that he will not concede and will continue to contest the results of the election for as long as he can. Though lawyers have already established that Trump has no case and cannot really affect the outcome of the election, the current political situation in the United States is tense, which is preventing the dollar from strengthening. Moreover, now that it is clear that a Democrat will sit in the White House, the markets anticipate more stimulus and spending in the future.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1891, with the price currently trading below it. The daily support levels lie at 1.1886 and 1.1881. The daily resistances are located at 1.1897 and 1.1901. The indicators of technical analysis agree in strongly recommending a buy position today.
