- EUR/USD has resumed its gains after a jittery end to November.
- Hopes about an upcoming vaccine and monetary stimulus may push the pair higher.
- Tuesday’s four-hour chart is painting a bullish picture.
The first breakout is often only a fakeout, and as warned – EUR/USD’s initial attack on 1.20 has failed. Monday’s choppy price action can be attributed to end-of-month flows. Equities had an outstanding month and the safe-haven dollar struggled – prompting some money managers to a last-minute scramble to readjust their portfolios.
That foggy price action is over now, and fundamentals still favor an upswing in the world’s most popular currency pair. The main driver is hope for a COVID-19 vaccine. US-based Moderna completed its Phase 3 immunization trial and confirmed a high efficacy rate of 94%. The firm announced it is asking for emergency approval to begin vaccinating against coronavirus from the US Food and Drugs Administration (FDA).
British authorities may grant the Pfizer/BioNTech inoculation the green light in the next few days, potentially registering the Western World’s first approved vaccine. Novavax also reported progress and while the AstraZeneca/University of Oxford project is suffering some difficulties, there are several additional efforts in various testing phases.
Monetary stimulus is another upside driver. Christine Lagarde, President of the European Central Bank, speaks again on Tuesday and will likely reiterate her pledge to expand the bond-buying scheme. The euro previously responded positively to the printing of euros – seeing it as enabling governments to boost the economies.
On the other side of the pond, dollar-printing had the opposite effect on the underlying currency – with markets seeing it as a devaluation from the dollar. Jerome Powell, Chairman of the Federal Reserve, is set to testify on Capitol Hill and urge lawmakers to provide fiscal stimulus. In prepared remarks,
Powell expressed concern about the next few months before a vaccine becomes available. The Fed Chair kept his cards close to his chest by refraining from hinting about the bank’s next moves. When he speaks later on Tuesday, elected officials will likely ask about buying more bonds. Any openness could boost stocks and weigh on the dollar.
While the monetary setup may be favorable to euro/dollar gains, the current economic data may limit the gains. Preliminary eurozone inflation figures are set to that the Core Consumer Price Index is only marginally above 0%, stoking fear of deflation. Final Purchasing Managers’ Indexes fro the manufacturing sector may also serve as a reminder about Europe’s current struggles with the covid winter wave.
In the US, Powell’s testimony comes just when the ISM Manufacturing PMI is due out. While economists expect a drop in November, estimates stand at figures pointing to robust…
Go to the news source: Euro looks ready to smash the 2020 highs amid vaccine and stimulus hopes