A pandemic disrupted financial markets and the global economy in 2020, and the greenback is the overall loser. The EUR/USD pair has reached levels last seen in 2018, not far from that year´s peak at 1.2554. After breaking above a descendant trend line coming from 2008, EUR/USD points to 1.2750, FXStreet’s Chief Analyst Valeria Bednarik reports.
Key quotes
“The world is betting on an economic comeback for mid-2021. It is possible but inequities will persist. Reaching pre-pandemic employment levels is outside the foreseeable future, while inflation does not even worth mentioning. Depressed consumption will likely keep it subdued for longer than the most pessimistic central banks’ estimates. Anyway, optimism reigns in the wider perspective and despite the market’s turmoil that spurs safe-haven demand here and there.”
“Among the first things Biden said was that he would keep the pressure on China and fight unfair trade practices. He nominated Katherine Tai to become the next US Trade Representative. Joe Biden said that ‘trade will be a critical pillar in our ability to build back better and carry out our foreign policy – foreign policy for the middle class.’ Worth noting a weaker currency is not always a bad thing. A frail dollar could contribute to a faster US recovery. The opposite is also valid, with an expensive currency anchoring economic progress.”
“In a much wider perspective, bears have dominated EUR/USD since July 2008, when the pair hit 1.6036. A descendant trend line from such a high has been broken in the last few months, but only in December, the pair gained enough momentum to confirm the bullish breakout. The next logical target comes at 1.2554, and additional gains beyond this last will signal a long-term bullish continuation. If bulls manage to push the pair beyond this last, the 1.2750 price zone is the next in line, as the pair has several monthly lows around it.”
“Bulls will get discouraged if EUR/USD loses the 1.2000 threshold, but won’t give up unless the pair falls below 1.1600 in the first quarter of the year, as it will return to levels below the long-term trend line. In such a case, lower lows will come into play, with the pair poised to extend its decline towards 1.0351, the multi-decade low posted in December 2016.”
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