EURUSD- The daily downtrend which started around 2018/04/20 (Strong 125.000 Resistance) and ended on 2020/05/26 around the 1.10 BRN. Since then we have seen a steady uptrend which was stopped by the 120.000 level on 2020/08/30 and has been holding so far.
In this case, I would be looking for a breakout on lower timeframes (1HR/4HR), since this level has been broadly “problematic” I will wait for strong fundamentals to give fuel and momentum.
If we broke the level 1.20 with strong momentum I would be looking towards the 1.25 level.
Fundamentals;
EUR- At a time where US real yields are rising more than Bund yields, this
could lead to investors taking profits on existing longs, keeping spot
moves locked in the narrow 1.16-1.20 range held since summer.
However, A Biden presidency and loose Fed likely keeps the USD
weak versus its major trading partners. We expect the global growth
backdrop to materially improve next year and experience less trade
friction, EUR positive
USD- There will be no rush to remove the loose fiscal/ loose monetary mix
support in our view. As summer data trends decelerate, further Fed
support for real rates markets will be increasingly likely in our view,
keeping the current USD trend lower intact.
• The Fed will likely also be keeping an eye on the trajectory of USD
real yields. If $ real yields, from intentionally suppressed levels, rise
too far, too fast, this may unwind all of the “good work” achieved so far.
Therefore the Fed’s shift to average inflation targeting allows it the
flexibility to keep policy dovish.
