Today we shall take a look at the EUR/USD currency pair. For over ten days now the pair has continued to decline in value. It remains above the 1.20 level but it’s at six-week lows and may fall further.
The outlook of the European single currency is somewhat confusing in that investors expect one thing but the market is playing to the opposite trend. Indeed, the expectation is that the economy of the eurozone was not hit quite as badly as previously estimated by the pandemic. Economic reports have shown a contraction but one that is slightly milder than the forecasts. Infection rates are also slowing down in Europe. However, despite all of this the euro is not stabilizing. There was a report from Pfizer that a delay in the distribution of vaccines will affect the entire European Union, which may have tipped the scales towards pessimism. In addition, there is political instability in Italy again, though in the past its impact on the euro has been short-lived. The ECB will be holding its first monetary policy meeting of 2021 this week but investors have no expectations about it whatsoever, as the minutes from the last gathering indicated that the central bank is satisfied with its current measures. Thus, the fate of the euro rests on market sentiment.
The next few days may be big for the dollar because Joe Biden is very close to his inauguration as President of the United States. The FBI has warned that there may be violent clashes across the country because Trump’s supporters refuse to accept the election results. In addition, the markets will have to adapt to the new government, entirely under the Democratic Party’s control, and adjust their expectations for more stimulus. Over the past few days the dollar has appreciated while equities have dropped but things will likely begin to change once Biden steps into office this Wednesday.
In terms of the daily chart, today we have a pivot point for the pair located at 1.2075, with the price currently trading slightly below it. The daily support levels lie at 1.2059 and 1.2051. The daily resistances are located at 1.2083 and 1.2099. The indicators of technical analysis agree in strongly recommending a sell position today.
