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The EUR/USD 1.15-1.20 range resistance is at risk as hopes for 2021 recovery outweigh the grip of COVID-19 restrictions on the region and likelihood of the European Central Bank (ECB) Pandemic Emergency Purchase Programme (PEPP) and Targeted Longer-Term Refinancing Operations (TLTRO) easing, per Westpac. 

Key quotes

“Last week’s block of the EC’s vaunted Recovery Fund, and its 7yr Budget, by Poland and Hungary may be seen as more of a frustration than risking any failure to implement the Fund and Budget. However, it places further pressure on ECB to enact larger-scale policy easing through its highlighted recalibration of their PEPP and TLTRO facilities. Guidance on the scale of recalibration will no doubt be provided into the Dec 10th ECB meeting.”

“The ECB seems particularly concerned that forward-looking household surveys are struggling to rebound. If confidence fails to build, hopes for a solid recovery from the Q4 secondary lockdowns may also be weak in the staff projections.” 

“At least the harsh lockdowns do appear to be effective as case counts are trending off their recent peaks and hopes have increased for festive easing of restrictions.” 

“ECB’s key staff update and expected easing coincide with EC’s last summit of 2020 on December 10. Although EUR/USD is threatening a test of 1.20, a surge above that is unlikely before the key issues on 10th Dec.”


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