Today we shall take a look at the EUR/USD currency pair. Over the past two weeks or so, the trend of this pair formed a peak at 1.2170 and descended from it. Now it remains to be seen if the pair can drop below the strong support at 1.20.
When ECB economists spoke about not wishing to see the euro above 1.20 but President Lagarde failed to offer comments in that regard towards the end of 2020, investors shrugged the statement off and started a rally for the European single currency. Now those concerns are becoming real again after the ECB’s first policy meeting for 2021. Reportedly, the European Central Bank wants the markets to be ready for an interest rate cut. Due to its already extremely soft monetary policy, the ECB has refrained from cutting interest for many months but it seems ready to start talking about a minor adjustment to the rate in light of the prolonged coronavirus crisis in the EU. Taking a slightly belated hint, the EUR/USD weakened over the past week. However, realistically speaking, any possible cut will be tiny and will not come for months. This is why the euro will retain the ability to rise whenever there is a high degree of risk appetite among investors.
At the moment, there are reasons for the USD to strengthen slightly, regardless of risk appetite and the developments surrounding the euro. A big part of the reason for this appreciation, or at the very least stabilization, is President Biden’s plan for fiscal stimulus. In theory, the introduction of stimulus packages would weaken the dollar. However, in this case the prospect is increasing US Treasury yields and thus supporting the dollar. The reserve currency is also winning from the panic that the GameStop short-squeeze caused on the markets last week. Even if sentiment shifts completely away from safe havens like the USD, the dollar is likely to put up more resistance than it did in 2020.
In terms of the daily chart, today we have a pivot point for the pair located at 1.2130, with the price currently trading well below it. The daily support levels lie at 1.2104 and 1.2089, both overcome. The daily resistances are located at 1.2140 and 1.2156. The indicators of technical analysis agree in strongly recommending a sell position today.
