EUR/USD Tests Key 38% Fibonacci Retracement Level

Today has been an active day on the markets, fueled by the recession of political uncertainty. The big winners have been the NASDAQ (+1.88%), the Canadian dollar (USD/CAD,-0.65%), and WTI crude oil (+0.75%). Conversely, Henry Hub natural gas futures are off more than 2.5%, setting the pace for decliners. In the first hours of the fledgling Biden administration, stocks are up and the Greenback is down.

In the coming weeks and months, politics will play a major role in establishing intermediate-term expectations toward the USD. Subsequently, questions regarding the future of U.S. COVID-19 stimulus, lockdowns, and economic restrictions will be answered. Also, the first Biden-era budget is due out within the next month. Most market analysts cite “deficit spending” as the primary theme, with the new administration choosing to “go big” to boost economic growth. At least for the first half of 2021, the supply of USDs in circulation is poised to increase significantly.

Despite these forecasts, the EUR/USD is only modestly up on the week. Let’s dig into the key technicals and see where this market stands.

EUR/USD Tests Key Fibonacci Support Level

In a Live Market Update from last week, I outlined a long trade for the EUR/USD. The play turned out to be a success, producing a quick 25 pip profit. If you got in on the action, well done!

For the near future, there will be two levels on my radar:

• Resistance(1): Spike High, 1.2349
• Support(1): 38% Macro Wave, 1.2064

Overview: The true x-factor facing all asset classes continues to be the progression of COVID-19. Recently, attention is being turned to a highly contagious COVID-19 variant known as B.1.1.7. If this strain prompts a governmental reaction similar to that of last spring, then all bets are off toward the Greenback and EUR/USD. 

If you’re active in the forex, be on the watch for news regarding B.1.1.7 and any policies addressing the variant from the Biden White House.