Search ForexCrunch
  • EUR/USD buyers have kept the pair supported above 1.2200, with EUR the best performing G10 currency since this week’s reopen.
  • The EU’s belated vaccine rollout began on Sunday and maybe boosting the euro.

EUR/USD has thus far survived repeated assaults no the 1.2200 level, with the buyers this far holding firm, though unable to push the pair back towards its European morning session high around 1.2250. At present, the pair trades higher by roughly 0.2% and is the best performing of the G10 currencies.

Euro hold firm vs burgeoning buck

Traders have sighted month, quarter and year-end flows as one factor supporting the US dollar on Monday, with the safe-haven currency advancing marginally despite strength in US equities on the back of US President Donald Trump’s signing of the $900B Covid-19 aid package and $1.4T omnibus speaking package that averts a government shutdown (equity gains would typically be a USD negative).

Though EUR/USD is off highs as a result of the US dollar’s recovery from lows, EUR is the best performing G10 currency on the day. No specific catalyst can be pointed at to explain euro outperformance. Some analysts might argue the belated start to the bloc’s mass Covid-19 vaccination programme is giving the currency a boost. The EU launched its vaccination programme on Sunday, less than a week after the European Medical Authority gave the Pfizer/BioNTech vaccine the green light.

Others might argue that the euro is benefitting amid the fallout of last week’s Brexit deal, which some might see as favouring the EU economy over the UK (given the fact that nothing has been agreed on services yet, a major part of the UK economy that the Europeans seek to attract).

The best approach is likely to not read too much into today’s price action, given the lack of market participants in wake of last Friday’s Christmas holiday and this Friday’s New Year’s Eve celebrations (many US and European players take leave at this time of year). Moreover, as noted in reference to the US dollar, month, quarter and year-end flows might also be working in favour of the euro.

EUR/USD consolidates within flag

EUR/USD is currently trading well within recent ranges; to the upside, highs were reached at just above 1.2270 midway through the month, while recent lows in the 1.2120s have acted as support since 14 December.

In fact, the pair looks to be consolidating within a pennant; to the upside, a downtrend that links the 17, 18 and 22 December highs is suppressing the price action while a downtrend linking the 9, 21, 22 and 23 December lows is supporting the price action. EUR/USD failed to break out to the upside of this pennant formation in earlier trade, and an upside break would likely require a meaningful push beyond 1.2240 and Monday’s 1.2250ish high. An upside break would open the door to a test of monthly highs around 1.2270.

A downside break would need the 1.2200 level to go first, then likely a move below 1.2180. The major area of support to watch at 1.2130 and just under, where resides the 21-day moving average at 1.2134 and the 14, 15, 16 and 21 December lows in the 1.2120s.

EUR/USD four hour chart