Today we shall take a look at the EUR/USD currency pair. Against all expectations, the euro breached $1.20 last week. It might be too early to tell but it seems it has found a resistance slightly above $1.21, from which it has rebounded.
This week will be big for the euro as two major meetings will offer more insight into the near future of the eurozone. First of all, the long-awaited policy meeting of the European Central Bank is this Thursday. The ECB has already confirmed that it is looking to ease monetary policy further in light of the second wave of the coronavirus pandemic and the October-November lockdowns it caused. The central bank is most likely not going to mess with the interest rate, but it will focus on channeling more funds into the economy via one or more of its many programs. Though in the past a soft monetary policy was associated with a weakening of the currency, in 2020 it is synonymous with growth and recovery, so the ECB’s moves are not likely to affect the euro. Plus, they are expected, so they are all priced in already. The second highlight for the EUR this week is an EU leaders summit that starts on Thursday in Brussels. The main topic on the agenda will be the coronavirus pandemic and the bloc’s plan of counteracting the worst of its economic effects. The problem with Poland and Hungary’s veto on the European Recovery Fund will most likely be discussed. Staple topics like climate change and trade are also going to come up. But what everyone wants to know right now is how Brexit will be handled as we are approaching the end of the transition period fast. Thus, all fundamental releases this week are going to pale in comparison and likely won’t move the euro much.
The US dollar may recover some of its lost positions, or at least establish a flat trading range for the EUR/USD this week in light of the European events, especially the ECB policy meeting. Nevertheless, the USD is not in a good position to strengthen significantly due to its status as a safe haven. Risk appetite is much higher at present, thanks to countries moving forward with Covid-19 vaccination plans, as well as due to hopes for more fiscal stimulus in the United States. Thus, between now and next week’s Federal Reserve policy meeting, we could see a consolidation of the exchange rate of this pair, but the long-term outlook for the USD remains bearish.
In terms of the daily chart, today we have a pivot point for the pair located at 1.2123, with the price currently trading below it. The daily support levels lie at 1.2107 and 1.2097, both overcome. The daily resistances are located at 1.2129 and 1.2139. The indicators of technical analysis agree in strongly recommending a buy position today.
