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  • EUR/USD turns negative following 2-month tops.
  • ECB Minutes note the recovery in the region lost traction.
  • German Consumer Confidence deteriorates in December.

Sellers stepped in following recent tops and drag EUR/USD back below the 1.1900 mark on Thursday.

EUR/USD weaker on dovish ECB, pandemic

EUR/USD slips back into the negative territory in the second half of the week after two consecutive daily advances and despite recording fresh tops in the 1.1940/45 band earlier in the session.

The re-emergence of concerns in light of the relentless progress of the coronavirus pandemic and its impact on global growth prospects appears to have regained the upper hand among investors, eclipsing at the same time recent optimism on potential vaccines and a less uncertain US political scenario.

In addition, the ECB Minutes stressed the economic recovery lost momentum into Q4 and reiterated that growth risks remain tilted to the downside. Furthermore, members are expected to closely follow data and the performance of the exchange rate while keeping a close look to the fiscal front.

In addition, ECB’s P.Lane said that the path to recovery in the region remains long and full of risks and warned against a longer period of lower inflation (than projected).

Data wise in Euroland, the German Consumer Confidence tracked by GfK retreated to -6.7 for the month of December. Back to the ECB, the M3 Money Supply expanded at an annualized 10.5% in October and Private Sector Loans rose 3.1% from a year earlier.

What to look for around EUR

EUR/USD manages to leave behind the 1.19 mark amidst a favourable atmosphere for the risk complex. In the very near-term, EUR/USD appears supported by prospects of a strong recovery in the region along with the increasing likelihood of extra stimulus in the US. Risks to this positive view emerge from the potential political effervescence around the EU Recovery Fund and increasing chances of further ECB easing to be announced as soon as at the December meeting.

EUR/USD levels to watch

At the moment, the pair is losing 0.12% at 1.1896 and faces immediate contention at 1.1800 (low Nov.23) followed by 1.1745 (weekly low Nov.11) and finally 1.1709 (Fibo level of the 2017-2018 rally). On the upside, a break above 1.1941 (monthly high Nov.26) would target 1.1965 (monthly high Aug.18) en route to 1.2011 (2020 high Sep.1).

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