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Euro crosses under pressure

31 December 2020

The EURUSD pair traded higher on Wednesday, gaining 0.38% to 1.2293. In five days, the price climbed by 156 pips, with the bulls retracing to two-year high. Near the end of the year, traders have been betting on US fiscal support, an improved economic outlook as the Covid-19 vaccine is rolled out, as well as dollar weakness in 2021.

Today’s macro agenda (GMT+3)

Current outlook

Most major currencies have been showing mixed performance in European trading, while the British pound and the Swiss franc are trading slightly in the red. The New Zealand dollar is up 0.33%, and the Australian dollar is 0.24% higher. At the time of writing, the euro was trading at 1.2290 (+0.01%). Trading volumes are thin as many investors are offline ahead of the New Year.

Upbeat sentiment continues to hold sway on the FX market, exerting a negative impact on the dollar. Investors are brushing off the upsurge in coronavirus infections and deaths. Instead, they are looking ahead to mass vaccinations and global economic recovery in the New Year.

Notably, the kiwi and the aussie are showing green on the screen. Investors look set to snap up risk assets on the last day of the quarter and the year. The euro climbed 4.93% against the dollar in Q4, 9.47% over the past six months, and 9.57% over the past 12 months.

Since December 23, the single currency has seeing gains followed by sharp pullbacks, which have become more frequent over the past 30 hours. Since all euro crosses are trading in the red, a drop to 1.2275 may well be in the cards. If the dollar index starts to correct upward alongside the falling euro crosses, then we would recommend a radar setting of 1.2262. Resistance is at 1.2330.



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