EUR/USD: Ready to attack 1.22 between hope and fear

EUR/USD has been grinding higher after the ECB decision and amid multiple negotiations. Another increase, followed by a pause, is on the cards as virus numbers continue rising and both Brexit and US stimulus talks are stuck, FXStreet’s Analyst Yohay Elam reports.

Key quotes

“The continent is preparing for the Christmas holidays with fear that travel and family mixing would contribute to the disease’s spread. Governments are torn between enabling the economies to breathe – which would be euro-positive – to halting infections, which would help the recovery. Decisions in Germany and France are of importance to the common currency.”

“Brexit deal or no deal? An accord is in the interest of both sides and markets are pricing in higher chances of an accord. While the euro is not sensitive as the pound to details about fisheries, major announcements are likely to rock the single currency.”

“While Biden prepares to take office, stimulus talks continue in the ‘lame-duck’ session. Even a more modest sum than the bipartisan $908 billion deal will likely be cheered given the protracted talks.”

“Concerns about the virus and shutdowns will likely remain a dominant topic for markets. Record numbers could weigh on market sentiment and boost the safe-haven dollar. On the other hand, markets will be awaiting the FDA’s verdict on Moderna’s covid vaccine due on Thursday. The regulator will likely give its second greenlight, injecting another shot in the arm to markets.” 

“The Fed is highly likely to leave its policy unchanged, including the Quantitative Easing program. Markets may be disappointed and the dollar could rise.”

“Resistance is at the 2020 peak of 1.2177, followed by the round 1.22 level, which played a role in 2018. Further above, the next levels to watch are 1.2310, 1.2420 and 1.25, all recorded in early 2018. Some support awaits at 1.21, a round number that played a pivotal role in early December. Is followed by 1.2055, a swing low around the same time.”