- EUR/USD has been rising after a favorable ECB decision and vaccine approval progress.
- Worries about the virus, US stimulus, and Brexit are holding the pair back.
- Friday's four-hour chart is painting a bullish picture.
Euro/dollar's consolidation may be coming to an end – and 1.22 is in sight, yet there are still some clouds to clear. After two injections of hope, additional developments are awaited.
The euro received a boost from the European Central Bank on Thursday. The Frankfurt-based institution announced a €500 billion expansion of its Pandemic Emergency Purchase Program (PEPP) as expected, but surprised by extending the program through March 2022. Investors cheered the move, which lowers governments' borrowing costs. In parallel, the EU finalized the multi-year budget after a compromise with Poland and Hungary.
Christine Lagarde, President of the ECB, said that the bank is monitoring the exchange rate, but did not offer starker language meant to push the euro lower. Her lack of urgency on the topic also allowed the common currency to rise.
See ECB Analysis: Lagarde shows her love for markets and the euro, more EUR/USD gains likely
Another shot in the arm came from the US Food and Drugs Administration, which recommended approving the Pfizer/BioNTech coronavirus vaccine. The American regulator is considered the global "gold standard" and should accelerate injections worldwide.
On the other hand, immunization could not come sooner – COVID-19 is raging on both sides of the Atlantic. Germany is set to tighten restrictions ahead of Christmas as daily deaths and cases hit new highs. and France abandoned plans to lift the nationwide lockdown as infections stopped falling.
The US recorded another day of over 3,000 deaths and yet another record in hospitalizations, above 107,000. The virus is taking a growing toll on the economy – US jobless claims jumped to 853,000 from near 700,000 in the previous week.
Despite the dual developments, Senate Majority Leader Mitch McConnel remains reluctant to give his blessing to new stimulus worth around $900 billion. Proposals from a bipartisan group of senators and the Treasury seem stuck in the mud. The safe-haven US dollar may gain further ground if the progress made earlier this week fully stalls.
Another set of talks is also deep in a quagmire – the EU and the UK are preparing for a no-deal Brexit, and that is weighing on the euro. The bloc announced a contingency plan in case deliberations hit the Sunday deadline without a breakthrough. UK Prime Minister Boris Johnson said there is a "strong possibility" of leaving on "Australian terms" – a code for no accord.
Euro/dollar is set to move to the tune of talks in Brussels and Washington and also to watch US data. The University of Michigan's Consumer Sentiment Index is set to edge down from 76.9 to 76.5 points in December.
See: US Michigan Consumer Sentiment December Preview: For once consumer attitudes may not matter
Overall, while the FDA and the ECB are moving forward, there are still several clouds in play.
EUR/USD Technical Analysis
Euro/dollar recaptured the broken uptrend support line on Thursday and is benefiting from upside momentum on the four-hour chart. It is also trading above the 50, 100 and 200 Simple Moving Averages. Moreover, the Relative Strength Index is below 70, outside overbought conditions – contrary to the previous swing to the highs.
Resistance awaits at 1.2177, the 2020 peak, followed by 1.22 and 1.2250, lines that played a role back in 2018.
Below the 1.2150 battlelines, support awaits at 1.21, which was a cushion last week. It is followed by 1.2080, 1.2060, and 1.2040, which provided support during December.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD eases toward 0.6500 after mixed Australian trade data
AUD/USD is seeing some fresh selling interest in the Asian session on Thursday, following the release of mixed Australian trade data. The pair has stalled its recovery mode, as the US Dollar attempts a bounce after the Fed-led sell-off.
USD/JPY rebounds above 156.00 after probable Japan's intervention-led crash
USD/JPY is staging a solid comeback above 156.00, having lost nearly 450 pips in some minutes after the Japanese Yen rallied hard on another suspected Japan FX market intervention in the late American session on Wednesday.
Gold price stalls rebound below $2,330 as US Dollar recovers
Gold price is holding the rebound below $2,330 in Asian trading on Thursday, as the US Dollar recovers in sync with the USD/JPY pair and the US Treasury bond yields, in the aftermath of the Fed decision and the likely Japanese FX intervention.
Top 3 Price Prediction BTC, ETH, XRP: Altcoins to pump once BTC bottoms out, slow grind up for now
Bitcoin reclaiming above $59,200 would hint that BTC has already bottomed out, setting the tone for a run north. Ethereum holding above $2,900 keeps a bullish reversal pattern viable despite falling momentum. Ripple coils up for a move north as XRP bulls defend $0.5000.
The FOMC whipsaw and more Yen intervention in focus
Market participants clung to every word uttered by Chair Powell as risk assets whipped around in a frenetic fashion during the afternoon US trading session.