EUR/USD to retreat from the highs amid overbought conditions

EUR/USD has been extending its gains after Biden was called the next President of the US. Further responses to the elections, central bankers and covid figures are eyed while Monday's 4-hour chart is pointing to overbought conditions, FXStreet’s Analyst Yohay Elam briefs.

Key quotes

“Democratic candidate Joe Biden has been elected the 46th President of the United States – the news burst on Saturday when markets were closed. While stocks continue higher and the safe-haven dollar is falling, there is room for a ‘buy the rumor, sell the fact’ response.” 

“There are several post-election developments to watch: Final counting from states: If Biden enlarges his lead, it would raise pressure on reluctant Republicans to acknowledge the result and bring the elections to a happy end. If the gap in Pennsylvania and Arizona tighten, it could cause uncertainty. Biden nominations: He will have to strike a balance between the left-wing of the party and the centrists. Investors will be tuned to who would be the next Secretary of the Treasury. Lael Brainard, a Governor at the Federal Reserve, is the leading candidate and would soothe markets. Senate races: Democrats still have a chance to gain control of the upper chamber. Two runoffs in Georgia due on January 5 could result in a 50-50 split in the Senate. Opinion polls toward the two races in the southern state may begin moving markets.”

“Christine Lagarde, President of the European Central Bank, will be speaking amid rising COVID-19 cases and their economic impact. The second lockdowns are set to have a smaller effect in comparison to the initial ones, at least according to German and French officials. With the US elections gradually taking less headspace, covid could gain prominence in moving markets.”

“The Relative Strength Index on the 4-hour chart is at 70 – indicating overbought conditions. Resistance awaits at the round 1.19 level, which was also a peak in September. It is followed by 1.1920, another peak from the same period. Some support awaits at 1.1860, a swing high from last week, and then at 1.1840.”