• EUR/USD has surged above 1.20 to the highest since May 2018. 
  • Vaccine hopes, monetary stimulus and a dose of political certainty are behind the move. 
  • Euro/dollar has significant room to run up to 1.2205.

Make EUR/USD great again – the world's most popular currency pair is finally moving rapidly and hitting levels last seen 31 months ago after a long period of frustration in the past. What is behind the move and where next?

Three reasons for the EUR/USD breakout

1) Vaccine hopes: Pfizer and BioNTech were the first to report high efficacy in a Phase 3 coronavirus immunization trial on November 9. Since then, additional updates from that project and also from Moderna, AstraZeneca and Novavax have been flowing. The next moves come from regulators – which are set to approve a jab as early as this week – and then the first injections. The news has been pushing the safe-haven dollar down and every update helps convince skeptics that "the cavalry is coming."

2) Monetary stimulus one-two punch

The European Central Bank and the Federal Reserve are both set to expand their bond-buying schemes – yet these developments have opposite effects on the underlying currencies. Since the pandemic broke out, ECB stimulus has been seen as supporting the eurozone's recovery by allowing governments to spend more. In the US, dollar-printing by the Fed triggers a broad risk-on mood that pushes the greenback lower. These reaction functions are a win-win for the euro.

3) Political certainty for a change

The US elections are over and there is a decisive winner – Joe Biden. While outgoing President Donald Trump continues crying foul, his attempts at overturning the elections are futile and investors are pricing out concerns about a contested election. Moreover, the nomination of Janet Yellen as Treasury Secretary is also reassuring. The former Fed Chair supports fiscal stimulus but is pro-trade. 

Another potential political development is an upcoming Brexit deal. At the time of writing, the EU and the UK have entered a "tunnel" – intense talks that are set to result in a written accord. Even without an imminent deal, Brexit will soon be over. 

After years of uncertainty, the mix of political hope, large stimulus and an upcoming solution covid all boost sentiment and weigh on the greenback.

EUR/USD big levels to watch

Euro/dollar has surpassed 1.2050 at the time of writing. It is already eyeing 1.2080, which was a temporary cap in late 2017. The next level to watch is 1.2150, which provided support around April 2018. More stubborn resistance is at 1.2210, which cushioned the currency pair more than once in February and March that year. 

Further above, there is little resistance all the up to 1.24, which held EUR/USD down before the crash in the spring of 2018. That year's peak of 1.2550 is the upside long-term target. 

Support awaits at the previous 2020 high of 1.2010, followed by 1.1920 and 1.18. 

More GBP/USD Three reasons to expect a sustained Santa rally for sterling

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

EUR/USD extends slide toward mid-1.0200s after US data

EUR/USD extends slide toward mid-1.0200s after US data

EUR/USD continues to decline toward 1.0250 during the American trading hours on Friday. After the data published by the UOM showed that the long-run inflation outlook rose to 3% in August from 2.9% in July, the dollar gathered strength against its rivals, weighing on the pair.

EUR/USD News

GBP/USD pushes lower 1.2100 on broad dollar strength

GBP/USD pushes lower 1.2100 on broad dollar strength

GBP/USD is trading deep in negative territory near 1.2100 during the American session on Friday. With the UoM's Consumer Sentiment Survey pointing to a modest increase in the long-run inflation outlook, the US Dollar Index extended its rally, reflecting a broad dollar strength.

GBP/USD News

Gold clings to modest gains above $1,790

Gold clings to modest gains above $1,790

Gold stays relatively resilient on Friday and trades modestly higher on the day above $1,790. Although the greenback continues to outperform its rivals on the latest US data, falling US Treasury bond yields help XAU/USD hold in positive territory.

Gold News

Shiba Inu ready to go ballistic: Shiba Eternity released in Vietnam

Shiba Inu ready to go ballistic: Shiba Eternity released in Vietnam

Shytoshi Kusama, the project leader of Shiba Inu announced the launch of Shiba Eternity for Vietnamese players. The game is available for testing and the team has asked users for their review. 

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Majors

Cryptocurrencies

Signatures