EUR/USD Forecast: Bulls readying another attack on 1.19 as data becomes great again

EUR/USD has been recovering as the Biden transition gets underway.
Economic data is gaining traction but still competes with coronavirus.
Tuesday's four-hour chart is painting a bullish picture.

Yohay Elam FXStreet

Upbeat US data, stronger dollar – this basic logic seemed to disappear and is now making a comeback, triggering a pullback in EUR/USD on Monday. However, the battle continues with politics still playing a role.

The safe-haven dollar is on the back foot once again after President Donald Trump authorized the General Services Administration to facilitate the transition to President-elect Joe Biden. The outgoing Commander-In-Chief made his move after Michigan's certified his loss and amid growing pressure from fellow Republicans. A smoother transition reduces the already low risk that Trump clings to power and also allows Biden and his team to have better chances of boosting the economy.

Janet Yellen, former Chair of the Federal Reserve, is set to lead these efforts as the new Treasury Secretary. Markets cheered the news of her nomination, also adding to pressure on the greenback. Yellen will likely push for more fiscal stimulus yet without advocating for left-leaning policies. She is a proponent of free trade.

Investors also seem calmer about an upcoming COVID-19 vaccine. AstraZeneca and the University of Oxford reported interim results for their immunization candidate, adding to hopes but also causing confusion. While the average efficacy came out at 70%, a lower dosage regimen pointed to 90% success. The partial figures were criticized. However, now the dust has settled and markets are waiting for fresh figures.

In the meantime, the old continent's coronavirus cases continue their gradual decline, contrary to the increase in the US, a factor underpinning the common currency.

Source: FT

As mentioned earlier, the only significant factor boosting the greenback was robust data. Markit's preliminary Purchasing Managers' Indexes for November beat estimates and pointed to strong growth. As the firm's PMIs tend to be disregarded by markets, their impact may be pointing to the comeback of statistics as substantial market movers.

Tuesday's calendar kicked off with an upgrade to Germany's Gross Domestic Product figures for the third quarter, 8.5% compared with 8.2% originally reported. Another release from Europe's largest economy is eyed – the IFO Business Climate for November, which is set to point to a decline in sentiment amid lockdowns.

Across the pond, US housing figures are of interest, as house prices are on the rise – partially a result of fiscal stimulus. The most significant publication is the Conference Board's Consumer Confidence measure for November, which could follow the parallel release from the University of Michigan with a drop.

Overall, the broader market sentiment favors appreciation in EUR/USD, yet data is gaining more traction and could trigger volatility in both directions.

EUR/USD Technical Analysis

Euro/dollar has recaptured the 50 Simple Moving Average on the four-hour chart and benefits from minimal upside momentum. Bulls have an advantage, but are not in full control.

Some resistance awaits at 1.1895, which capped the pair last week, followed by 1.1905, Monday's high. It is followed by 1.1920 and 1.2010.

The first cushion is at 1.1850, which held EUR/USD up last week, followed by 1.1815 and 1.18, , the latter being Monday's low point.

More When the market shivers, the Fed delivers? Where next for markets

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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