Today we shall take a look at the EUR/USD currency pair. There are clear signs that the downward trend that began on January 7 came to an end. Since January 19 the pair has been gaining in value but it’s not yet clear if it will manage to break above 1.22.
Last week’s policy meeting of the European Central Bank brought zero surprises for the euro. The ECB did not loosen its monetary policy any further, which was expected, considering it made adjustments in its previous meeting in December and big changes don’t come every month. All lending and deposit rates are also the same as before. The lack of new stimulus helped the euro appreciate, an incentive that was also echoed by broader risk appetite among investors. Thanks to President Biden’s first moves in the Oval Office, there are now hopes that the new POTUS will be able to keep his promises and deliver a huge stimulus package plus a proper vaccination plan. These prospects are boosting economic sentiment and driving more interest towards risky assets like the euro.
All of the factors encouraging the European single currency’s growth are working against the US dollar. The rising probability of an economic recovery under Biden thanks to a proper control of the coronavirus pandemic and increased government spending is weakening the reserve currency. Thus, unless the President runs into a problem halting his ambitious plans, we expect the dollar to continue losing ground to the euro. This week will certainly be crucial as Biden is set to face some resistance from Republicans over his stimulus bill, but there are ways for him to press ahead with the legislation.
In terms of the daily chart, today we have a pivot point for the pair located at 1.2168, with the price currently trading below it. The daily support levels lie at 1.2163 and 1.2158. The daily resistances are located at 1.2173 and 1.2178. The indicators of technical analysis are a bit mixed but lean towards recommending a sell position today.
