EUR/USD Forecast: Upside break out of range? Vaccine hopes outweigh everything else

Is the light at the end of the tunnel becoming brighter? Investors received another shot in the arm, this time from AstraZeneca and the University of Oxford. The British immunization project reported efficacy of 70% on average – and 90% for a lower dose regiment. Injecting 1.5 doses instead of two proved more efficient. 

If the interim results are confirmed, it could mean being able to vaccinate more people. The European Union has a broad agreement with AstraZeneca and the doses only require a normal fridge temperature for storage. Monday's encouraging development joined earlier headlines of a joint G-20 commitment to hasten the deployment of vaccines.

Immunization could not come sooner. The winter wave of coronavirus has prompted governments to impose restrictions and these are taking their toll. Markit's preliminary Purchasing Managers' Indexes for November have all dropped, with services sectors contracting at a faster clip, weighing on the euro. France, which announced a stricter lockdown, is doing worse than Germany. 

Encouragingly, the EU seems to have turned a corner in stopping the spread of the virus, with the case curve bending lower. In the US, infections remain on the rise. 

Source: FT

Markit's US PMIs are also set to decline, yet remain in growth territory. However, the focus is on politics. President-elect Joe Biden is set to announce his picks for Treasury Secretary later in the week. Federal Reserve Governor Lael Brainard is reportedly in the lead for the post.

Outgoing President Donald Trump has been unsuccessful in his bid to overturn the election results, suffering blows in Georgia and Pennsylvania. Reuters has reported that Trump intends to slap new sanctions on Chinese companies, potentially boosting the safe-haven dollar. 

Overall, while there are several developments moving markets, vaccine optimism seems to have the upper hand. 

EUR/USD Technical Analysis

Euro/dollar is trading within a well-defined range between the double-bottom support at 1.1815 and 1.1895, a double-top. Both levels were last tested last week. The currency pair trades above the 50, 100, and 200 Simple Moving Averages, yet momentum and the Relative Strength Index are balanced. 

All in all, the bulls have a minor lead. Above 1.1895, the next lines to watch are 1.1920 and 1.2010.

Support awaits at 1.1850, which was a cushion late last week. Below 1.1815, the next level to watch is 1.1780.

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