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EUR/USD has been rising cautiously as European lockdowns counter vaccine optimism. Can the pair break the double-top at 1.2177? The answer depends on the dual virus narratives and also on two sets of negotiations (Brexit and US fiscal stimulus) – and there is fresh room for optimism for euro bulls, FXStreet’s Analyst Yohay Elam reports.

Key quotes

“Senate Majority Leader Mitch McConnell said it is time to get together and seal the COVID-19 relief package. It is probably no coincidence that McConnell shifted from reluctance to push through a bill to urging action on the same day that the Electoral College formalized President-elect Joe Biden’s victory. Reports of progress on Capitol Hill could boost market sentiment and weigh on the US dollar. A deal would also be a relief for the Federal Reserve, which publishes its last rate decision of the year on Wednesday.”

“There is a glimmer of hope in Brexit talks. Reports suggest some progress has been made on the thorny topic of setting a Level-Playing-Field – rules for regulatory alignment – and other topics. However, a breakthrough may have to wait for another day, as Chief EU Negotiator Michel Barnier said the path to a deal is narrow.” 

“Germany will enter a holiday shuttering on Wednesday and is followed with similar measures by Czechia and the Netherlands. France has already postponed the end of its nationwide lockdown and Italians are also likely to face limitations around the most important holiday on the calendar.” 

“US coronavirus cases, deaths, and hospitalizations remain on the rise, shattering records and potentially forcing severe restrictions in New York City. However, while America’s covid mortalities are around 300,000, the beginning of a vaccination campaign is boosting hope for a smooth 2021 and countering the current gloomy present.” 

“The 2020 peak of 1.2177 is a major hurdle – especially after it became a double-top following Monday’s failed attempt to break higher. Topping that level opens the door to 1.22 and 1.2250. Support awaits at 1.2120, which is where the 50 SMA hits the price. The next cushion is 1.2105, a low point from last week.”