EUR/USD Shows Its Strength Amid A Gloomy Mood, Three Reasons To Recover

Friday’s publications are unlikely to be cheerful. The Retail Sales report for December will likely show a year-over-year gain in 2020, but a subdued Christmas shopping season. The University of Michigan’s initial read of Consumer Sentiment is also set to decline.

These publications may push the dollar lower as investors price in lower-for-longer interest rates and Quantitative Easing.

What about the euro side of the equation? While Europe’s prospects leave much to be desired, the main driver is the dollar. France brought forward its nighttime curfew to 18:00 in most of the country Germany is mulling tightening its restrictions and so are Spain’s regions. In Italy, former Prime Minister Matteo Renzi triggered a coalition crisis.

Nevertheless, there is some room for recovery, coming from dollar weakness rather than euro strength. 

EUR/USD Technical Analysis

Euro/dollar dropped below the former triple bottom of 1.2125 on Thursday but recaptured that line. The new 2021 trough is 1.2110, and as long as that line holds, bulls have room to recover. Bears are still in the lead as momentum is marginal to the downside and the pair is trading below the 50, 100, and 200 Simple Moving Averages.

Below 1.21, the next lines to watch are 1.2060 and 1.2040.

Resistance awaits at Thursday’s peak of 1.2175, followed by 1.2222, the weekly high.

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