• EUR/USD has risen on prospects that Democrats control the Senate and pass fiscal stimulus.
  • The Federal Reserve could expand its bond-buying scheme amid labor market concerns. 
  • Wednesday's four-hour chart is pointing to further gains. 

The more the dollar is printed, the less it is worth. Prospects of additional fiscal and monetary stimulus are weighing on the greenback and could continue doing so. EUR/USD is already trading at the highest since early 2018 and moving to 1.24 is on the cards.

Georgia's special runoff elections dealt the first blow to the safe-haven greenback. Democrat candidate Rapahel Warnock won his race against Senator Kelly Loeffler. The second race, pitting Republican Senator David Perdue against challenger Jon Ossof is closer, but trending toward another Democratic victory.

Ossof is leading by 0.37% after 98% of the votes were counted. The remaining ballots come from Democratic-leaning counties, potentially cementing his victory. The critical level is 0.50% – above which Georgia will not hold a recount. If the gap widens beyond that point, networks will likely call the election – and effective control of the Senate – for Democrats. 

A majority, even the slimmest, would allow President-elect Joe Biden to pass another relief package worth between $1 to $2 trillion. A boost to the US and global economies would encourage more risk-taking and a sell-off of the dollar. 

Georgia Elections Analysis: Markets to surf higher on imminent blue wave, USD to chop around

While the world may be better with vaccines, the current coronavirus situation remains grim – and is taking its economic toll. ADP's private-sector jobs report has shown a surprising loss of 123,000 positions, far below estimates for an increase of positions.

The correlation between the payroll firm's statistics and the official data has markedly loosened in 2020. Nevertheless, there is a growing chance that setback in the US economy is deeper than previously thought. The Federal Reserve may come to the rescue – expanding its bond-buying scheme. 

Jerome Powell, Chairman of the Federal Reserve, signaled that he is ready to ramp up the bank's purchase of government debt if needed. A struggling labor market and potential for further fiscal stimulus may boost the chances of such a move.

The Fed's meeting minutes are due out later in the day and they may show how close the Fed is to expanding its support – creating money out of thin air. While the protocols refers to a meeting held in mid-December, it is essential to note that the Fed revises the document just before it is published. The Fed is aware of its impact on markets. 

More Five factors moving the US dollar in 2021 and not necessarily to the downside

All in all, there is room for further dollar falls. 

Where does the euro stand? The European Medicines Agency has approved the Moderna vaccine, as expected while inflation figures missed in both Germany and France.

Moreover, COVID-19 continues raging through the old continent and the vaccination campaign is moving in slow motion. Nevertheless, the US suffers from the same immunization bottlenecks and has also suffered a spike in covid statistics

More Coronavirus: Statistics, herd immunity, vaccine calendar and impact on financial markets and currencies

EUR/USD Technical Analysis

Euro/dollar continues benefiting from upside momentum on the four-hour chart while the Relative Strength Index remains shy of the 70 level – allowing for more gains before it hits overbought conditions. 

Resistance awaits at the fresh high of 1.2350, the highest since 2018. It is followed by the round 1.24, which played a role back then, and finally by 1.2555 – the peak that year. 

Support is at 1.2310, the previous 2021 high, and then by 1.2275 which held the pair down last month. Further below, 1.2240 and 1.2210 are the next levels to watch. 

More EUR/USD Price Forecast 2021: Euro-dollar long-term bullish breakout points to 1.2750

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.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD drops towards 7000 amid resurgent USD demand

AUD/USD drops towards 7000 amid resurgent USD demand

AUD/USD is easing back towards 0.7000,  fading the rebound led by China's central bank LPR rate cut. A US dollar rebound, despite improving mood, weighs heavily on the aussie. The pair ignores the uptick in the S&P 500 futures. 

AUD/USD News

EUR/USD skids to near 1.0550 as risk-on impulse fades, Eurozone data eyed

EUR/USD skids to near 1.0550 as risk-on impulse fades, Eurozone data eyed

The EUR/USD pair has witnessed a minor fall after breaching the early Asian session’s consolidation formed in a narrow range of 1.0579-1.0588 as the risk-off impulse rebounded. The asset has slipped to near 1.0550 and is expected to remain uncertain.

EUR/USD News

Gold bulls recapture 200-DMA, more gains likely? Premium

Gold bulls recapture 200-DMA, more gains likely?

Gold Price is headed for the first weekly gain in five weeks this Friday, despite posting small losses, in the wake of a sharp rebound in the US dollar. The dollar recovers its ground even though risk sentiment remains in a fairly better spot, with the S&P 500 futures up 0.65% on the day. 

Gold News

How to trade the next 20% upswing in Binance Coin price

How to trade the next 20% upswing in Binance Coin price

Binance Coin price is on a recovery rally and shows promise of a further uptrend. Adding credence to this run-up is the price inefficiency that is likely to propel BNB higher. Binance Coin price crashed to $205 on May 13 as the crypto markets crumbled due to the LUNA-UST debacle.

Read more

Tesla regains $700 despite cut from S&P 500 ESG Index

Tesla regains $700 despite cut from S&P 500 ESG Index

Tesla's stock slips as it is kicked out of the S&P 500 ESG index. Elon Musk reacts aggressively, calling it a scam. Growth fears dominated and weighed on the overall market mood, leading to a negative close on major Wall Street indices. 

Read more

Majors

Cryptocurrencies

Signatures