EUR/USD: the wait for action is over!

The renewed interest in the US dollar was short-lived. While Monday's US manufacturing PMI came out well above expectations at a 5-year high, the USD has been on fire. This provoked strong reactions especially on the eUR/USD but also all the related pairs as well as Gold which pushed $1849.

It was indeed a big setback for USD pairs on Monday, but it was short-lived. No invalidation of the bearish trend of the US dollar as a short-term safe haven. At the same time, the indices had not reacted either.

For the news is encouraging, not only on the progress of vaccines but also on the prospect of an economic recovery. On the other hand, the verdict of the US elections could have resulted in growing tension, but this will probably not be the case. Donald Trump began the process of handing over power to Joe Biden with access to records and funds. On the other hand, Janet Yellen is expected to take over the position of US treasury secretary, a former president of the FED.

All this positive information does not favour a strong recovery of the USD, while even in the Euro zone, Germany has revised upwards its growth for the third quarter to +8.4%, a record.

The EUR/USD, after having leached in Intraday, is regaining strength and heading towards resistance at 1.1900, a bulwark that has been weakened for weeks.

KEY CHART ELEMENTS

Technically, nothing has changed in daily with still a bullish impulse since the medium-term support at 1.1625. Current consolidation could result in an exit from the top with Monday's bearish move having been erased. As a consequence, we will now be positive in the short term by invalidating the bullish provisions in case of a return below the MM20 Daily, in blue, at 1.1800 and in view of a crossing of the 1.1900 to aim for the annual highs around 1.1966.

MEDIUM-TERM FORECAST

In view of the key chart factors we have mentioned, our outlook for the pair is now positive in the medium term.