EUR/USD Forecast: Why the euro can rise in the uptrend channel, shrugging off covid concerns

  • EUR/USD has been edging lower as covid concerns took over the market mood.
  • Vaccine optimism, potential dovishness from the Fed's Powell, and even Brexit could boost the euro.
  • Tuesday's four-hour chart is showing the pair is trading in an uptrend channel.

There is nothing like the first time – Moderna's encouraging vaccine news only had a short-lived impact on markets. Concerns about the current spread of coronavirus have taken over. However, optimism may return.

The pharmaceutical firm reported a whopping 94.5% efficacy rate in its COVID-19 immunization candidate, and also a higher storage temperature that would facilitate its distribution. Stocks jumped and the euro advanced, but not for long.

Perhaps one of the reasons for the lack of a significant impact on the euro is that the EU is relying on other efforts and has a limited agreement with Moderna. On the other hand, European Commission President Ursula von der Leyen announced a deal with CureVac, another company using the same mRNA approach applied by Pfizer, Moderna and others. 

The markets' fresh mellow mood stems mostly from new restrictions imposed in the US. Calfornia, the largest state, hit the brakes on its reopening program, while Iowa, New Jersey and others also announced limitations. The seven-day rolling average of infections is at around 150,000 per day, and hospitalizations hit a new high of 73,000. 

Source: The Covid Tracking Project

The old continent is also struggling. While the caseload in France has sharply fallen off the highs, Intensive Care Units remain under pressure. In Germany, Chancellor Angela Merkel continues seeking tougher restrictions after an initial meeting with regional leaders failed to yield an agreement. 

Nevertheless, the question is not how will the world emerge from the covid crisis, but when. AstraZeneca, Johnson & Johnson, and others are set to provide preliminary results in the next few weeks, paving the way out. 

See What you need to know about the dollar in the post-vaccine announcement world

In the shorter term, a speech from Jerome Powell, Chairman of the Federal Reserve, could provide a boost for EUR/USD. The world's most powerful central banker opened the door to more bond-buying in early November and may reiterate his call in a speech later in the day. That could weigh on the dollar.

Powell will also have the chance to respond to Retail Sales figures for October. Economists expect an increase of 0.5% in headline consumption, a more moderate pace than the jump of 1.9% reported in September. The lack of fiscal stimulus may have weighed on expenditure last month.

See Retail Sales Preview: Will curfews bring down consumer spending?    

Another minor factor that could boost the common currency is Brexit. According to The Sun, Chief UK Negotiator David Frost said an agreement could come early next week. Both sides are trying to make progress ahead of an EU leaders' videoconference on Thursday. While the pound is the primary mover, the common currency would also benefit from calm. The election of Joe Biden as US President could push Britain to strike a deal. 

All in all, fundamentals are pointing higher. 

EUR/USD Technical Analysis

Euro/dollar is trading with an upwards parallel channel in the past week and benefits from upside momentum on the four-hour chart. It is also holding above the 50, 100 and 200 Simple Moving Averages, another bullish sign. 

Resistance awaits at the weekly high of 1.1860, followed by 1.19, a round number that capped EUR/USD in recent weeks. Further up, 1.1920 is the next level to watch.

The first line of support is 1.1915, the weekly bottom, followed by 1.1780, a swing low last week. The November 11 trough of 1.1740 is next down the line. 

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.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD hits fresh one-month low amid souring market mood

EUR/USD has been extending its falls and dips below 1.21 as US retail sales badly disappointed and the worsening mood is supporting the safe-haven dollar. Markets digest Biden's stimulus plan. US Consumer Sentiment declined to 59.2 points. 


GBP/USD retreats toward 1.36 amid fresh dollar strength

GBP/US has pared its gains and falls toward 1.36 as the dollar gains ground. The UK economy shrank by 2.6% in November, better than estimated. The UK is ramping up its vaccination campaign and PM Johnson is pressured to ease the lockdown. 


Gold extends sideways grind near $1,850

The XAU/USD pair registered small daily gains on Thursday but struggled to extend its recovery amid a lack of significant fundamental drivers on Friday. As of writing, the pair was up 0.15% on a daily basis at $1,849.

Gold news

Forex Today: Markets “sell the fact” on Biden's stimulus, dollar rises, retail sales eyed

Markets are on the back foot after Biden hinted about tax hikes while introducing stimulus. The safe-haven dollar is edging higher despite Powell's pledge to keep monetary policy accommodative. 

Read more

DXY breaks above key downtrend, eyes move above 91.00

USD has been strongly supported on what has shaped up to be a very much risk off final trading day of the week. Most G10/USD pairs have seen significant weakness, aside from CHF/USD and JPY/USD, given that the two currencies are also considered “safe havens”.

US Dollar Index News

Forex Majors