Today we shall take a look at the EUR/USD currency pair. Despite several upward waves in the last few weeks, the trend has once again shifted in favor of the dollar. The rebound off of the 1.23 level came at the end of last week and is set to continue.
Despite the losses over the past couple of days, the European single currency remains well positioned for further growth. Fundamentals from within the eurozone have not been disappointing, despite the lockdowns at the end of 2020, some of which continue still. The risk posed by the coronavirus pandemic is something investors are currently willing to ignore, instead placing their trust in risky assets like the euro, thanks to hopes for an economic recovery. The vaccines are one part of the equation, boosting market optimism, despite the slow pace of vaccinations. The second reason for risk appetite dominating market sentiment were the developments from last week in the United States. Regardless of the mayhem caused by Trump and his supporters, Joe Biden was officially confirmed as the next President of the United States and will step into office next week. In addition, Democrats secured control over both the House and the Senate, which means they will have complete control over the government. More substantial stimulus and increased government spending is on the horizon, which is improving the odds of the US recovering from the crisis caused by the pandemic, and thus improving the state of the global economy as well. Whatever losses we are seeing in the euro at the moment are almost certainly due to profit-taking after the pair reached 1.23 last week. The upward trend will resume.
Based on the developments in the US mentioned above, the dollar’s future is one of weakness. Increased spending will add pressure to the currency, as will the continued lack of demand for safe havens. There won’t be any interesting fundamentals out of the US at least until Wednesday, when the country will publish its latest inflation reports. The USD will remain susceptible to broad market sentiment and monetary policy developments in the United States.
In terms of the daily chart, today we have a pivot point for the pair located at 1.2199, with the price currently trading below it. The daily support levels lie at 1.2171 (overcome) and 1.2155. The daily resistances are located at 1.2215 and 1.2243. The indicators of technical analysis agree in strongly recommending a sell position today. However, a buy will work better in the weekly term.
