EUR/USD Violates Ascending Triangle Pattern – Brace for Buying!
Arslan Butt • 3 min read
During Wednesday Asian trading session, the EUR/USD currency pair succeeded in maintaining its overnight bullish bias and remained well bid above the 1.2150 level, mainly due to the risk-on market sentiment. That was supported by the resumed progress toward a massive US government spending bill and COVID-19 relief measures, which have weakened the safe-haven US dollar and contributed to the gains in this currency pair. Moreover, the upbeat market tone was further boosted by hopes on the coronavirus (COVID-19) vaccine front, which further weaknened the greenback and boosted the currency pair.
On the contrary, the intensifying concerns about increasing numbers of COVID-19 deaths and possibilities of the economically painful hard lockdowns keep questioning the pair’s upside momentum, which has become a key factor that is keeping a lid on any additional gains in the currency pair. At the time of writing, the EUR/USD currency pair was trading at 1.2163, and consolidating in the range between 1.2146 and 1.2167. Moving on, the traders seem cautious to place any strong position ahead of US stimulus news and Eurozone PMIs.
Regarding the positive side of the story, the renewed optimism over vaccines for the highly infectious coronavirus provided a boost to the market risk tone. Vaccine hopes were sparked after the US Food and Drug Administration (FDA) granted permission, on Dec. 11, for emergency use of BNT162b2, the COVID-19 vaccine co-developed by Pfizer (NYSE: PFE) and BioNTech SE (F:22UAy). Now, Moderna is also set to approach the US Food and Drug Administration (FDA) for approval of its vaccine.
At the same time, the FDA recently approved a first home test for the deadly virus. All in all, the positive developments over the COVID-19 vaccine keep favoring the market risk-on mood and undermining the safe-haven US dollar.
Across the pond, the reason for the gains in equity markets could also be attributed to the fresh progress toward a massive US government spending bill and COVID-19 relief measures. As per the latest report, the Congress leaders promised to break the long-standing deadlock on the coronavirus relief package during the Asian trading hours, which instantly weakened the safe-haven greenback. After US Senate Majority Leader Mitch McConnell and Minority Leader McCarthy’s positive comments, House Speaker Nancy Pelosi showed her willingness to wind up the pending coronavirus (COVID-19) aid package talks tomorrow.
As a result, the broad-based US dollar failed to stop its bearish bias of the previous day, drawing further offers on the day, as demand for safe-haven assets decreased amid progress toward agreeing on a US fiscal stimulus bill. Furthermore, the losses in the US dollar could also be associated with lingering doubts over economic recovery from COVID-19 in the US. However, the losses in the greenback helped the currency pair to stay bid. Meanwhile, the US dollar index, which measures the greenback against a bucket of currencies, was last at 90.477, after falling to 90.419 on Monday.
On the contrary, the concerns about rising numbers of COVID-19 deaths and possibilities of the economically disastrous hard lockdowns keep challenging the upbeat market performance, which has become a key factor that is keeping a lid on any additional gains in the currency pair. It is worth recalling that the spread of the virus has resulted in renewed local lockdowns in the UK and the US, as witnessed after New York decided to enter into a second full lockdown, due to the surge in COVID-19 cases. In addition, Germany has also drastically extended resstrictions on activities throughout the nation.
Looking ahead, the market traders will keep their eyes on the US Federal Reserve’s (Fed) final meeting of 2020. Meanwhile, the UK inflation and PMI, as well as the European PMI, not to forget US Retail Sales, will be key to watch. All in all, the updates surrounding the Brexit, the coronavirus and the US stimulus package will not lose their importance.
Daily Support and Resistance
Pivot Point 1.2127
On the technical front, the EUR/USD was trading sideways, below the 1.2176 level, having violated the immediate resistance around the 1.2176 level, and now it’s heading higher, towards the next target level of 1.2250. We may have an excellent buying opportunity over 1.2175, and it may target the 1.2250 mark. Thus, we have now opened a buying trade to target the 1.2250 level. Good luck!