A pandemic disrupted financial markets and the global economy in 2020, and the greenback is the loser overall. The EUR / USD pair hit levels last seen in 2018, not far from this year’s peak of 1.2554. After crossing a downtrend line from 2008, EUR / USD is peaking at 1.2750, reports FXStreet chief analyst Valeria Bednarik.
Key quotes
“The world is betting on an economic return in mid-2021. It is possible, but inequalities will persist. Reaching pre-pandemic employment levels is not in the foreseeable future, while inflation is not even worth mentioning. Depressed consumption is likely to keep it subdued longer than central banks’ more pessimistic estimates. Either way, optimism reigns in a broader perspective and despite the market turmoil that is driving demand for safe havens here and there.
“Among the first things Biden said was that he would keep the pressure on China and fight unfair trade practices. He appointed Katherine Tai to become the next US Trade Representative. Joe Biden said that “trade will be an essential pillar of our ability to better rebuild and carry out our foreign policy – a foreign policy for the middle class.” It should be noted that a weaker currency is not always a bad thing. A fragile dollar could contribute to a faster recovery in the United States. The opposite is also true, with expensive currency anchoring economic progress. “
“From a much broader perspective, bears have dominated EUR / USD since July 2008, when the pair hit 1.6036. A descending trendline from such a top has been broken over the past few months, but only in December has the pair gained enough momentum to confirm the breakout to the upside. The next logical target is 1.2554, and further gains beyond that will signal a long-term bullish continuation. If the bulls manage to push the pair past it, the 1.2750 price zone is next as the pair has several monthly lows around it.
“Bulls will be discouraged if EUR / USD loses the 1.2000 threshold, but will not give up unless the pair drops below 1.1600 in the first quarter of the year, as it will return to levels below the long term trend line. In such a case, lower lows will kick in as the pair is poised to extend its decline to 1.0351, the decades-long low posted in December 2016. ”
