Today we shall take a look at the EUR/USD currency pair. This currency pair ended the year on a bright note, around the level of $1.22, which many investors had previously thought impossible in 2020. The pair is in a great position to continue its rally into 2021.
Though the situation in Europe is more uncertain at the moment compared to a week ago, the euro is likely to continue growing in value. Indeed, over the last couple of days concerns over the spread of the coronavirus in the EU have grown again, especially as countries started seeing cases of the new strain of Covid-19 from the United Kingdom. Most notably, Germany has struggled to keep its infection rate as low as desired, which means Europe’s strongest economy might remain in a strict lockdown at least until the end of January. In addition, the distribution of the vaccines is turning out to be slower than anticipated; it might as well take the entire year until everyone in the EU gets the vaccine, based on the current numbers. France poses another red flag: despite the massive death toll there, many people have refused to get vaccinated due to rising anti-vax sentiment. These are new challenges that the EU will need to face in 2021, but despite them all, investors believe the bloc is on its way to economic recovery. Today’s PMI data was slightly disappointing but did not weaken the euro, a testament to the trust the markets currently have in the single currency.
There are many question marks surrounding the US dollar at the beginning of 2021, largely because the United States is on the verge of major changes. Joe Biden will be inaugurated as President in less than three weeks, while two Senate runoffs still take place before then in Georgia, deciding the makeup of the Senate for the next two years. It remains to be seen how Biden will handle the pandemic, international trade, and foreign policy, all areas where Trump left his mark. But for now, the expectation is that the US will focus on its own economic recovery through accommodative policies, which translate to weakness for the dollar. If investors remain optimistic about the global economy, safe havens like the USD will likely continue to weaken. Today’s PMI report from the United States likely won’t change much.
In terms of the daily chart, today we have a pivot point for the pair located at 1.2244, with the price currently trading above it. The daily support levels lie at 1.2235 and 1.2222, with the rate holding above them. The daily resistances are located at 1.2266 and 1.2280, both overcome. The indicators of technical analysis agree in strongly recommending a buy position today.
