EUR/USD: Vaccine not a game changer? Euro bulls disagree and rage higher

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  • EUR/USD has been shrugging off cautious words from central bankers and extending its gains. 
  • Coronavirus headlines and speculation about the next stimulus boosts are eyed.
  • Wednesday’s four-hour chart is painting a bullish picture for EUR/USD.

A coronavirus vaccine is no game-changer for forecasts – the words of Christine Lagarde, President of the European Central Bank, poured some cold water on investor enthusiasm. The ECB already incorporated immunization from the virus in 2021 as part of its outlook and remains worried about the current spread of the disease.

Jerome Powell, Chairman of the Federal Reserve, echoed her cautious words. COVID-19 statistics remain elevated, with US hospitalizations hitting a new record above 78,000, Germany recording the highest number of deaths in seven months, and France – Lagarde’s home country – hitting two million virus cases.

Nevertheless, vaccine news keeps investors upbeat. Pfizer and BioNTech, which were the first to report efficacy in a Phase 3 trial, announced they passed a key safety milestone. The firms are set to seek Emergency Usage Authorization for their inoculation shortly, aiming to administer the vaccine in December.

In the eurozone, there are tentative signs that the covid curve is turning a corner, perhaps opening the door to easing restrictions in some countries.

Source: FT

Can EUR/USD extend its gains? Apart from hopes on the coronavirus front, the common currency has an advantage against the dollar when it comes to the reaction function to bond-buying. When the Fed creates money out of thin air to buy bonds, the money flows to risk assets outside America and the dollar is devalued.

The same response was seen in the eurozone before the pandemic – but that is no longer the case. When the ECB announced or signaled an expansion of its Pandemic Emergency Purchase Program (PEPP), it was seen as a boost to the economies of the old continent – supporting the common currency.

Lagarde stated that additional stimulus is coming, while Powell only opened the door to a potential expansion. If the Fed proceeds with another boost, EUR/USD has room to rise. 

Final eurozone inflation figures for October will likely confirm the drop of 0.3% in the headline Consumer Price Index. US Building Permits and Housing Starts are eyed in the US on Wednesday. However, the focus is on the virus and central banks.

EUR/USD Technical Analsysis

Euro/dollar continues trading in an upward channel and benefits from upside momentum on the four-hour chart. It bounced off the 50 Simple Moving Average earlier in the week. Bulls remain in charge.

Some resistance awaits at 1.1895, the weekly high, followed by 1.1920, November’s top point. Further above, 1.2010 is eyed.

Support is at the Daily low of 1.1850, followed by 1.1815, which provided support early in the week. The next cushion to watch is 1.1780, which is where the 100 and 200 SMAs converge.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.