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#1 15-12-2020 11:37:38

johnedward
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From: Paris - France
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EUR/USD: pressure remains bullish ahead of the FED meeting

EUR/USD: pressure remains bullish ahead of the FED meeting


The EUR/USD continues its neutral evolution since its last short-term high on 4 December at levels close to the 1.2175 resistance zone. The rise was fuelled by the valuation of the euro against the backdrop of the prospect of a Brexit agreement, and the decline of the USD expected just before the year's last FED meeting.

On the EUR side: There is a glimmer of hope in the discussions on Brexit. The reports show that progress has been made on the subject of fair rules, particularly with regard to regulatory alignments. However, nothing has yet been won, as the EU's chief negotiator, Mike Barnier, says the road to an agreement is narrow. Germany will apply new restrictive measures as of tomorrow, followed by the Czech Republic and the Netherlands, which will introduce similar measures. Italians are also likely to face restrictions around the Christmas holidays.

On the USD side: Senate majority Leader Mitch McConnell said it was time to meet and finalise emergency aid for the virus. McConnell went from reluctance to pass a bill to a call to action the same day the Electoral College formalised Biden's victory. Progress reports on Capitol Hill could boost market sentiment and weigh on the dollar. A deal would also be a relief for the FED, which releases its final rate decision of the year tomorrow.

Against this backdrop, it would appear that all of its factors argue for a continuation of the upward movement of the EUR/USD.

KEY CHART ELEMENTS
In the absence of a signal for a bearish turnaround, the short-term trend remains bullish despite numerous signals of weakening, and a continuation of the upward trend seems possible towards the next resistance at 1.2229 if the current resistance at 1.2175 is broken. Beware, however, it would seem that the currency pair is struggling to break through this famous resistance which has already been double tested. A break of 1.21 could send a bearish signal on this currency pair, the technical configuration would effectively validate a double top formation with in this case a bearish target which would aim at a return to the psychological zone of 1.19.

FORECAST
We retain a neutral opinion under 1.2175, which would become bullish if this resistance is broken.

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