EUR/USD Forecast: Euro's three boosters may propel it above ascending triangle ahead of the Fed
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UNLOCK OFFER- EUR/USD has been advancing toward the yearly highs amid vaccine, stimulus and Brexit optimism.
- US retail sales and the Fed decision may try to hold it back, albeit with limited success.
- Wednesday's four-hour chart is showing a bullish ascending triangle.
The technicals have said their word – a surge is coming, but do fundamentals back a breakout? Most of them do. Here are three factors already fueling EUR/USD:
Three EUR/USD boosters
1) US stimulus hopes: Senate Majority Mitch McConnell jumped into talks on Capitol Hill and his urge to seal a deal for more relief has brought fresh impetus to the talks. His move came after he finally acknowledged President-elect Joe Biden's victory.
While there are differences with some Democrats, optimism about a lame-duck accord – potentially preceding another one under the new administration – is boosting sentiment. Markets would like more generous stimulus but will take anything at this point. This weighs on the safe-haven dollar.
2) Vaccine progress: The European Medicine Agency has brought forward its decision on the Pfizer/BioNTech vaccine to December 21 from the 29, and it could not come sooner. Germany has entered a strict lockdown on Wednesday and other countries are also struggling with a fresh resurgence of COVID-19.
The US and the UK are already administering the inoculation. America's Food and Drugs Administration published upbeat analysts of Moderna's vaccine, paving the way for giving it the greenlight. US cases, deaths, and hospitalizations continue rising – California order of 5,000 bodybags is especially grim.
3) Brexit deal coming? Rumors of an imminent accord in London proved wrong, but the intense talks in Brussels and silence from negotiators is a sign that the EU and the UK are making headway. The pound's upswing is also dragging along the euro.
What's next?
A busy day awaits investors. Markit's preliminary Purchasing Managers' Indexes are set to show a drop in sentiment amid the winter wave. The firm's surveys in the US are also eyed.
See US Markit December PMI: Optimism curtailed?
Retail Sales figures for November are of higher interest – as consumption is some 70% of the US economy. A minor drop is on the cards after several upbeat months. Disappointing statistics could be enough to send EUR/USD over the top, without waiting for the day's main event.
See US November Retail Sales Preview: If consumer spending fades?
The Federal Reserve is set to leave interest rates unchanged in its final meeting of 2020 – and speculation focuses on the bank's bond-buying scheme. Will the Fed expand its program or shift toward longer-term maturities? Investors expect some support from Jerome Powell, Chairman of the Federal Reserve, despite his recent upbeat comments on the economy.
See Federal Reserve Preview: How a dose of economic Christmas cheer could spoil the market mood
The recent slowdown and Congress' failure to act so far have raised expectations. However, there is room for disappointment as the bank may wait for another month. The Fed publishes its quarterly forecasts, and while borrowing costs are set to remain at zero through 2022, an updated outlook on growth and employment are of special interest.
See US Federal Reserve Rate Decision Preview: Projections, projections, projections
Overall, a busy day with many moving parts could see a break higher, yet a Fed disappointment could trigger a setback.
EUR/USD Technical Analysis
Euro/dollar is trading within an ascending triangle, which is a bullish pattern. The ceiling of this triangle is 1.2177, the 2020 high which was tackled several times. Momentum remains to the upside while the pair is also trading above the 50, 100 and 200 Simple Moving Averages.
Above 1.2177, the next lines to watch are the round 1.22 and then 1.2250 and 1.2310, all played roles in 2018.
Support awaits at 1.2120, which provided support earlier in the week and is also where the 50 SMA hits the price. It is followed by 1.21 and 1.2060, stepping stones on the way up.
- EUR/USD has been advancing toward the yearly highs amid vaccine, stimulus and Brexit optimism.
- US retail sales and the Fed decision may try to hold it back, albeit with limited success.
- Wednesday's four-hour chart is showing a bullish ascending triangle.
The technicals have said their word – a surge is coming, but do fundamentals back a breakout? Most of them do. Here are three factors already fueling EUR/USD:
Three EUR/USD boosters
1) US stimulus hopes: Senate Majority Mitch McConnell jumped into talks on Capitol Hill and his urge to seal a deal for more relief has brought fresh impetus to the talks. His move came after he finally acknowledged President-elect Joe Biden's victory.
While there are differences with some Democrats, optimism about a lame-duck accord – potentially preceding another one under the new administration – is boosting sentiment. Markets would like more generous stimulus but will take anything at this point. This weighs on the safe-haven dollar.
2) Vaccine progress: The European Medicine Agency has brought forward its decision on the Pfizer/BioNTech vaccine to December 21 from the 29, and it could not come sooner. Germany has entered a strict lockdown on Wednesday and other countries are also struggling with a fresh resurgence of COVID-19.
The US and the UK are already administering the inoculation. America's Food and Drugs Administration published upbeat analysts of Moderna's vaccine, paving the way for giving it the greenlight. US cases, deaths, and hospitalizations continue rising – California order of 5,000 bodybags is especially grim.
3) Brexit deal coming? Rumors of an imminent accord in London proved wrong, but the intense talks in Brussels and silence from negotiators is a sign that the EU and the UK are making headway. The pound's upswing is also dragging along the euro.
What's next?
A busy day awaits investors. Markit's preliminary Purchasing Managers' Indexes are set to show a drop in sentiment amid the winter wave. The firm's surveys in the US are also eyed.
See US Markit December PMI: Optimism curtailed?
Retail Sales figures for November are of higher interest – as consumption is some 70% of the US economy. A minor drop is on the cards after several upbeat months. Disappointing statistics could be enough to send EUR/USD over the top, without waiting for the day's main event.
See US November Retail Sales Preview: If consumer spending fades?
The Federal Reserve is set to leave interest rates unchanged in its final meeting of 2020 – and speculation focuses on the bank's bond-buying scheme. Will the Fed expand its program or shift toward longer-term maturities? Investors expect some support from Jerome Powell, Chairman of the Federal Reserve, despite his recent upbeat comments on the economy.
See Federal Reserve Preview: How a dose of economic Christmas cheer could spoil the market mood
The recent slowdown and Congress' failure to act so far have raised expectations. However, there is room for disappointment as the bank may wait for another month. The Fed publishes its quarterly forecasts, and while borrowing costs are set to remain at zero through 2022, an updated outlook on growth and employment are of special interest.
See US Federal Reserve Rate Decision Preview: Projections, projections, projections
Overall, a busy day with many moving parts could see a break higher, yet a Fed disappointment could trigger a setback.
EUR/USD Technical Analysis
Euro/dollar is trading within an ascending triangle, which is a bullish pattern. The ceiling of this triangle is 1.2177, the 2020 high which was tackled several times. Momentum remains to the upside while the pair is also trading above the 50, 100 and 200 Simple Moving Averages.
Above 1.2177, the next lines to watch are the round 1.22 and then 1.2250 and 1.2310, all played roles in 2018.
Support awaits at 1.2120, which provided support earlier in the week and is also where the 50 SMA hits the price. It is followed by 1.21 and 1.2060, stepping stones on the way up.
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