EUR/USD Forecast: Three positive factors set to drive euro above resistance

Happy Monday – the usually ironic greeting that office workers say to each other is relevant to EUR/USD bulls. Valentine's Day is over but there is love in the air for further gains, and for three reasons.

1) Stimulus focus

Former President Donald Trump has been acquitted for inciting insurrection as the majority that voted to convict him failed to reach two-thirds as required by the constitution. While political analysts are poring over the implication for the torn Republican Party and the nation, for investors it only means one thing – the focus returns to stimulus. 

President Joe Biden aims to pass as much as $1.9 trillion in covid relief and will likely settle for less, and that depends on talks with conservative members of his Democratic Party. For markets, the more and the sooner, the better. Trump's trial clogged the Senate's agenda, and that is now over. 

2) Vaccine optimism

Large-scale research in Israel showed that Pfizer's vaccine is 94% efficacious in the real world – and despite the British variant – matching figures seen in trials. The study compared 600,000 people who received two doses compared to 600,000 others who did not, and controlled for various factors. A high level of efficiency was seen across age groups. 

The US and the UK continue with their immunization drive, with Britain reaching its 15 million people threshold. While Europe lags behind, the pace has picked up in recent days, providing hope. Moreover, coronavirus cases and deaths are retreating in most eurozone countries. 

3) Italian stability

Former European Central Bank President Mario Draghi has become Italy's Prime Minister after mustering a large majority from the country's political parties. Draghi's nomination has already pushed Italian yields lower, and his clout may allow him to effectively deploy European funds and also have a positive impact on the EU's next economic moves. 

Will, he eventually hit road bumps? Italy's complicated politics and tough choices may complicate his task down the road, but a dose of stability in the bloc's third-largest economy is positive for the common currency. 

All in all, there is room for the euro to rise. 

EUR/USD Technical Analysis

Euro/dollar is benefiting from upside momentum on the four-hour chart and is trading above the 50 and 100 Simple Moving Averages. The currency pair's first attempt to break above the 200 SMA has failed, but it remains close. Critical resistance awaits at 1.2150, which was last week's high and previously converged with the 200 SMA. 

Further above, the mid-January top of 1.2190 and 1.2225 are the next levels to watch. 

Support awaits at 1.2080, a swing low, and then by 1.2055, which separated ranges during February. Further down, 1.20 and 1.1950 are eyed. 

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