Today we shall take a look at the EUR/USD currency pair. Last week the pair climbed above 1.22, a level that hardly anyone thought possible in 2020. Today the trend has turned bearish but this may be a small correction after a month and a half of steady gains.
There are currently no domestic factors that can cause a weakness in the euro. The European Central Bank’s latest round of stimulus was already priced in and did not affect the single currency in the slightest. In addition, economic reports from around the eurozone published in the past week were generally positive. Even data in Germany, the EU country that is struggling to curb the coronavirus pandemic the most, exceeded investors’ expectations. There isn’t anything on the radar that can disrupt the euro. Instead, the main determinant for the single currency will be risk appetite. For example, today there is a slightly higher demand for safe havens than we’ve seen in the past month or so because of a new highly transmittable variety of the coronavirus found in the United Kingdom. Many countries have responded to the news with travel bans and some disruptions in international supply chains are possible. Though these developments are not directly linked to the euro, the drop in risk appetite is depressing the single currency at present.
The position of the US dollar is a bit unclear due to the mixture of opposing factors in the financial markets today. For weeks now, the general trend among investors has been in favor of risky assets, which caused the dollar to slump to multi-year lows. In addition, an announcement from the Senate has investors optimistic that the $908 billion stimulus bill will be approved today, finally offering some much-needed support for the US economy. The number of new daily Covid-19 infections in the United States is also dropping, even though it still remains higher than anywhere else in the world. Plus, with now both Pfizer and Moderna having their vaccines approved in the US, optimism is likely to prevail. But as mentioned above, today there is a bit of panic over the UK strain of Covid and the travel bans, so trading might take a different course over the next day or two until the news is fully absorbed by the market.
In terms of the daily chart, today we have a pivot point for the pair located at 1.2219, with the price currently trading below it. The daily support levels lie at 1.2203 and 1.2194, both overcome. The daily resistances are located at 1.2227 and 1.2244. The indicators of technical analysis agree in strongly recommending a buy position today.
