Today we shall take a look at the EUR/USD currency pair. Despite all the various pressures for the euro, the pair has pushed to its highest level in 2020 and the bullish trend seems ready to continue.
The European single currency is about to enter a very precarious situation as it pushes closer to $1.20. Several key members of the ECB said earlier in 2020 that $1.20 is the absolute maximum the euro can go to without becoming too expensive to sustain the economic recovery of the European Union. However, it is impressive that the euro managed to climb from just 1.16 to almost 1.20 in just four weeks, especially when you consider the coronavirus outbreak in Europe and the upcoming further loosening of the already-dovish monetary policy of the ECB are priced in. The rally is driven by the hope for an end to the pandemic in the next few months thanks to several Covid-19 vaccines becoming available. In addition, there is also an expectation that the United States will soften its monetary stance too and issue a lot more stimulus under Joe Biden’s presidency come 2021. This week we expect a lot of economic data from the EU, which might be disappointing due to the November lockdowns, but it may not shock the pair as much as expected. Still, as the EUR/USD inches closer to 1.20, there may be a short-term flattening of the trend, or even a downward correction while investors try to decide whether to stick to risk appetite.
While the risk appetite among investors has worked in the euro’s favor, it has done the opposite for the safe haven-linked US dollar. The dream of a post-pandemic world, facilitated by the emergence of three working vaccines, as well as Biden’s presidential win and plans for handling the pandemic with fiscal stimulus are painting a much softer picture for the dollar in the coming months. As a result, the reserve currency has slumped, with the dollar index dropping to 92 this month. Nevertheless, with 1.20 perceived as a strong resistance, and with the EU’s bout with the coronavirus still ongoing at present, it is possible to see the USD dig in its heels and hold on at the current levels, or even recovering some of the ground it lost in November.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1968, with the price currently trading above it. The daily support levels lie at 1.1962 and 1.1954. The daily resistances are located at 1.1976 and 1.1982, both overcome. The indicators of technical analysis agree in strongly recommending a buy position today.
