The euro collapsed early on Monday, as the market grappled with the coronavirus mutation in the UK which was having a major ‘risk reduction’ effect in the markets, forcing everyone to buy the American dollar. With enough time, it looks like we’ll likely continue to go higher, trying to close the gap from the open. Keep in mind that liquidity was almost nonexistent and therefore the move was probably a bit of a stretch. Nonetheless, this is obviously a major problem for the markets to contend with as Christmas approaches, so it will be interesting to see how things play out. The only thing you will need to do is be very careful with the position size you use.
Video EUR / USD 22.12.20
Longer term, I think the US dollar still has some problems, mainly because of the stimulus measures and of course the fact that more are likely to come. With Joe Biden’s victory in the White House, that will almost certainly add to the idea that the revival is happening. The Federal Reserve is likely to do a lot of stimulus on the road as well, so at the end of the day it’s likely to be a very noisy market no matter what, and therefore protecting your trading capital will be the most important thing.
Below, the 1.20 level should continue to provide support and essentially a “floor” in the market. As far as selling is concerned, I think just waiting for an opportunity to go long should continue to be the best way to play in this market.
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