- EUR / USD buyers have held the supported pair above 1.2200, with the EUR being the best performing G10 currency since this week’s reopening.
- The late launch of the vaccine in the EU started on Sunday and may boost the euro.
He EUR/USD it has so far survived repeated attacks failing to hit the 1.2200 level, with buyers so far holding their ground, though unable to push the pair towards its European morning session high around 1.2250. Currently, the pair is trading higher by about 0.2% and is the best performing currency of the G10.
The euro holds firm against the resurgent dollar
Traders have seen month, quarter and year-end flows as a factor underpinning the US dollar on Monday, with the safe-haven currency advancing marginally despite strong US stocks thanks to the signing of US President Donald. Covid-19 Trump of $ 900 B for aid package and omnibus package of $ 1.4 trillion avoiding government shutdown (capital gains would normally be a negative dollar).
Although the EUR / USD is far from the highs as a result of the US dollar’s recovery from the lows, the EUR is the best performing G10 currency on the day. No specific catalyst can be pinpointed to explain the euro’s outperformance. Some analysts might argue that the late start of the bloc’s massive Covid-19 vaccination program is giving the coin a boost. The EU launched its vaccination program on Sunday, less than a week after the European Medical Authority gave the green light to the Pfizer / BioNTech vaccine.
Others might argue that the euro is benefiting amid the fallout from last week’s Brexit deal, which some might see as favoring the EU economy over the UK (given the fact that it has yet to be agreed nothing about services, a major part of the UK economy that Europeans seek to attract).
The best approach is likely not based too heavily on today’s price action, given the lack of market participants in the wake of last Friday’s Christmas holidays and this Friday’s New Years Eve celebrations (many players Americans and Europeans are leaving at this time of year). Furthermore, as noted in reference to the US dollar, monthly, quarterly and year-end flows could also be acting in favor of the euro.
EUR / USD consolidates within the pennant
EUR / USD is currently trading well within recent ranges; On the upside, highs were reached just above 1.2270 mid-month, while recent lows at 1.2120 have acted as support since December 14.
In fact, the pair appears to be consolidating within a pennant; To the upside, a downtrend linking the highs on December 17, 18, and 22 is suppressing price action, while a downtrend linking the lows on December 9, 21, 22, and 23 supports price action. EUR / USD failed to break out of this pennant formation in the previous trade, and a break to the upside would likely require significant momentum past 1.2240 and Monday’s high of 1.2250. A bullish breakout would open the door to a test of monthly highs around 1.2270.
A break to the downside would need the 1.2200 level to go first, then probably a move below 1.2180. The main support area to watch at 1.2130 and just below, where the 21-day moving average resides at 1.2134 and the lows of December 14, 15, 16 and 21 at 1.2125.
4 hour chart
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