• EUR/USD shot to fresh two-month tops on Thursday amid sustained USD selling.
  • COVID-19 vaccine optimism continued undermining the safe-haven greenback.
  • Disappointing German macro data capped gains amid holiday-thinned liquidity.

The EUR/USD pair had good two-way price moves on Thursday and finally settled in the red, snapping two consecutive days of winning streak. The US dollar prolonged its recent downward trajectory led by the optimism over coronavirus vaccines and was further pressured by Wednesday's rather unimpressive US macro data. The unexpected jump in the US Initial Weekly Jobless Claims added to market worries about the economic fallout from new COVID-19 restrictions and raised expectation for more fiscal stimulus from the incoming Biden administration. This, in turn, was seen as one of the key factors that pushed the pair to fresh two-month tops.

The pair, however, started losing momentum following the release of German GFK Consumer Confidence Index, which dropped from a revised -3.2 in the previous month to -6.7 for the month of December. The pair retreated over 55 pips from the daily swing high level of 1.1941, albeit lacked any strong follow-through. Given that the US markets were closed on the back of the Thanksgiving holiday, relatively thin liquidity conditions held investors from placing any aggressive bets. The pair showed some resilience below the 1.1900 mark, instead attracted some dip-buying and gained some follow-through traction during the Asian session on Friday.

Market participants now look ahead to the release of Eurozone Consumer Confidence data for November. This, along with a speech from the German Bundesbank President Jens Weidmann, will influence the shared currency. On the other hand, the USD will continue to be driven by the broader market risk sentiment, which might further assist traders to grab some meaningful opportunities on the last day of the week.

Short-term technical outlook

From a technical perspective, the formation of an indecisive candle on Thursday could be seen as the first sign of possible bullish exhaustion. That said, the emergence of some dip-buying on Thursday and the subsequent move up favours bullish traders. The positive outlook is further reinforced by bullish technical indicators on the daily chart, which are still far from being in the overbought territory. Hence, some follow-through strength towards the key 1.2000 psychological mark, en-route YTD tops near the 1.2010 region, looks a distinct possibility. Above the mentioned levels, the pair seems all set to extend the momentum and aim to reclaim the 1.2100 mark for the first time since April 2018.

On the flip side, weakness below the 1.1900 mark is likely to find some support near the 1.1880 region and any subsequent dip might now be seen as a buying opportunity. This, in turn, should help limit the downside near the 1.1855-50 region. A convincing breakthrough might prompt some technical selling and accelerate the fall towards the 1.1800 mark. The corrective slide could further get extended towards the 1.1750-45 support zone, which if broken decisively might negate any near-term bullish bias and turn the pair vulnerable to weaken further below the 1.1700 round-figure mark.

fxsoriginal

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.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD hits fresh one-month low amid souring market mood

EUR/USD has been extending its falls and dips below 1.21 as US retail sales badly disappointed and the worsening mood is supporting the safe-haven dollar. Markets digest Biden's stimulus plan. US Consumer Sentiment declined to 59.2 points. 

EUR/USD News

GBP/USD retreats toward 1.36 amid fresh dollar strength

GBP/US has pared its gains and falls toward 1.36 as the dollar gains ground. The UK economy shrank by 2.6% in November, better than estimated. The UK is ramping up its vaccination campaign and PM Johnson is pressured to ease the lockdown. 

GBP/USD News

Gold extends sideways grind near $1,850

The XAU/USD pair registered small daily gains on Thursday but struggled to extend its recovery amid a lack of significant fundamental drivers on Friday. As of writing, the pair was up 0.15% on a daily basis at $1,849.

Gold news

Forex Today: Markets “sell the fact” on Biden's stimulus, dollar rises, retail sales eyed

Markets are on the back foot after Biden hinted about tax hikes while introducing stimulus. The safe-haven dollar is edging higher despite Powell's pledge to keep monetary policy accommodative. 

Read more

DXY breaks above key downtrend, eyes move above 91.00

USD has been strongly supported on what has shaped up to be a very much risk off final trading day of the week. Most G10/USD pairs have seen significant weakness, aside from CHF/USD and JPY/USD, given that the two currencies are also considered “safe havens”.

US Dollar Index News

Forex Majors

Cryptocurrencies

Signatures