EUR/USD Forecast: Euro gets two shots in the arm, Germany holds it back, 1.22 on bulls' radar

EUR/USD has been moving higher amid hopes for Brexit and US stimulus deals.
Investors are shrugging off a Christmas lockdown in Germany for now.
Monday's four-hour chart is painting a bullish picture.

Yohay Elam FXStreet

Markets are pricing the future, not the present – at least most of the time. EUR/USD has begun the last full trading week of 2020 on the up thanks to hoping in two sets of talks.

Brexit: The Sunday deadline came and went with the EU and the UK deciding on extending the talks – or "going the extra mile" as both announced. While UK Prime Minister Boris Johnson said the sides are "very far apart" and France previously threatened to veto a deal it is unhappy with, reports suggest some progress is being made behind closed doors.

Once again, significant Brexit developments that send the pound surging also carry the euro along for a ride. Intense negotiations in Brussels are likely to continue impacting the euro. The clock is ticking down toward the end-of-year expiry of the transition period and volatility may further rise.

US fiscal stimulus: Democrats and Republicans continue deliberating a new relief package in the lame-duck session. Markets will probably cheer any accord that adds money to the world's largest economy – and hope for more when President-elect Joe Biden enters the White House in January.

The Electoral College is set to ratify the former Vice-President's victory on Monday after outgoing President Donald Trump failed in court again. The Supreme Court – a third nominated by Trump – rejected an attempt to overturn results in several key states.

Markets see the elections are over and focus on another development on Friday – the Food and Drugs Administration gave its final approval to the Pfizer/BioNTech coronavirus immunization, Americans will begin receiving the jabs on Monday. While the news was expected, scenes of injections in the UK have previously boosted sentiment and that will likely repeat itself.

The inoculations could not come soon enough – the seven-day rolling averages of infections, hospitalizations and deaths have been hitting new records in America. The worsening covid situation is not major news, yet Germany's announcement of a severe nationwide lockdown is a bitter Christmas gift. Grinding Europe's largest economy to a near-halt is undermining the euro's rally.

Source: FT

Brexit, stimulus and virus updates are set to dominate EUR/USD moves – probably a cautious rise.

More EUR/USD Weekly Forecast: Ready to break 1.22, yet the Fed, Brexit, stimulus and virus loom

EUR/USD Technical Analysis

Euro/dollar has bounced off the 50 Simple Moving Average on the four-hour chart and maintains its upside momentum – both bullish signs. The Relative Strength Index is still below 70, outside overbought conditions.

All in all, bulls are in the lead.

Some resistance awaits at the daily high of 1.2160, followed by the 2020 peak of 1.2177. Further above, 1.22 and 1.2250 are in play.

Support is at 1.2105, which provided support on Friday, followed by 1.2060, last week's low. The next lines to watch are 1.2040 and 1.20.

More Where next for the Fed, fiscal stimulus and Trump

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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