Today we shall take a look at the EUR/USD currency pair. Last week the pair demonstrated some uncertainty, first dropping to a five-week minimum, then recovering its positions towards the end of the week. This lack of a clear trend may persist for some time.
At the moment, there is no incentive for the European single currency to strengthen. The European Union is experiencing an extremely heavy outbreak of the novel coronavirus. Lockdowns have been put into place in many EU member states until the end of November, and could possibly be extended until the end of the year. Thanks to the pandemic, Q4 in the eurozone will most probably be quite disappointing for the economy. The European Central Bank is going to loosen its monetary policy further in December to mitigate some of the damage from the second wave of the pandemic, and this will only weaken the euro further. Any bullishness seen in the pair these days has more to do with the dollar than the euro, in all likelihood.
The deciding factor for the US dollar right now is risk appetite. Last week we saw some optimism among investors after Pfizer’s announcement that its Covid-19 vaccine works, but then came the realization that it will still take months for the pharma company to get through the paperwork of launching a new drug and additional time to secure supply chains. This gives the pandemic a wide window to continue wreaking havoc on the global economy and keep the demand for safe havens like the dollar pretty high. The Covid-19 situation in Europe and the United States is critical at the moment and may be enough to keep the dollar strong for the time being. Plus, it is now official that there will not be any fiscal stimulus until Biden inherits the Presidency in January, so safety assets will rule supreme until then.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1843, with the price currently trading slightly below it. The daily support levels lie at 1.1837 and 1.1828. The daily resistances are located at 1.1852 and 1.1858. The indicators of technical analysis agree in strongly recommending a buy position today.
