It’s been a big day for Euro backers as the EUR/USD has broken out to the bull. With only a few hours to go in today’s forex session, the EUR/USD is up nearly 100 pips on heavy bidding. Rates have eclipsed 1.1530, shattering the previous yearly high at 1.1494. The last time we saw valuations above the 1.1500 handle was January of 2019.
So, why the sudden strength in the EUR/USD? There are several factors at play:
- Today’s announcement of an E.U. bailout package is driving hopes of a Q3 and Q4 2020 Eurozone economic recovery.
- COVID-19 cases continue to increase in the U.S. at a rapid pace. Subsequently, calls for a rollback of June’s reopen are beginning to take root.
- Another U.S. stimulus package is being negotiated, which will inject even more capital into the marketplace.
- The FED remains committed to QE Unlimited and a 0.0% target rate for the foreseeable future.
If you add these factors up, it’s easy to see why the Greenback is fading vs the euro. For now, it appears that the smart money is trading in their USDs for nearly any other asset.
EUR/USD Spikes Over 1.1500
From a technical standpoint, there’s not much to see in the EUR/USD. Rates are posting multi-year highs and a bullish bias is warranted.
Overview: Since March, it’s been up, up, and away for the euro vs the Greenback. And, this trend is likely to continue into 2021. Until the FED decides to cut back on QE and boost interest rates, the USD will continue to relinquish market share.
While a weaker dollar is good for equities, commodities, and exports, the loss of purchasing power will negatively impact consumers. At this point, one has to think that USD devaluation may be the ultimate long-term outcome of the COVID-19 pandemic.