Hey! This is Philip with our new weekly outlook of the Forex market.

 

 

 

Incumbent President Donald Trump is still refusing to concede election defeat, something previously unseen in the United States’ history. Nonetheless, most experts view his disputes unfounded on a legal basis, and this is why the markets so far don’t seem to care much. However, we need to keep an eye on this because if by any chance, it becomes more likely that the Supreme Court will accept some of Trump’s legal challenges, then markets will surely react negatively and reverse the post-election moves.

The other major news last week was that Pfizer’s COVID-19 vaccine trials were 90% effective. The FDA is expected to soon grant permission for the vaccine to be used on the public. Despite the continuous surging new coronavirus infections in the US and everywhere in the world, the news for the vaccine is a big positive in the whole situation. The markets will likely stay focused on the positive news, and risk appetite is now more likely to prevail in the coming weeks and months.

Currently, there are no big implications for the US dollar’s direction from the “game-changing” vaccine news as currencies are all about relative attractiveness between two economies and currencies. On that note, little has changed aside from the fact that Biden should be a little more negative for the dollar than Trump. But then again, most other major currencies presently suffer from their own problems, such as, e.g., the euro and sterling. So, it seems likely that the dollar can hold up on a broad basis for at least some time more before Biden’s policies start to take the bearish effect.

Not much is going on on the US economic calendar this week, except for retail sales tomorrow (Tuesday). The broader themes that were driving Fx will continue to do so this week, and mainly those are risk appetite, and risk aversion based on the severity of new COVID infections and how fast and effective the distribution of vaccines will be.

 

 

The euro was up modestly last week, but further upside movement is doubtful at the very least. The Eurozone economy is facing another recessionary quarter (Q4) as a result of the harsh lockdowns that were implemented across Europe to fight the 2nd COVID-19 wave.

The ECB is expected to go big on stimulus in response at their December 10 meeting. Investors’ attention should soon start to turn to this event. The ECB has already clearly signaled that they don’t like EURUSD appreciation anywhere near 1.20, so they will try to sound as dovish as possible on December 10. All of this suggests that the fuel in the EUR’s tank should be near empty, and the currency is likely to reverse lower, sooner rather than later.

The European Fx calendar sees no major events for the current week, which leaves the factors discussed above to determine the euro’s direction. 1.20 in EURUSD is highly unlikely to be breached in the face of new massive ECB stimulus. Traders are more likely to wait for the event to pass before taking the pair either higher or lower from this loose 1.16 – 1.18 range.

 

 

The weekly technical picture here remains almost unchanged from last week. EURUSD tried to break below 1.18 last week but failed. If it does so this week, this scenario is still likely to lead to lower levels, and possibly a new test of 1.16.

A range has been established roughly between the 1.16 zone as support and 1.1850 – 1.19 as resistance. Last week’s candle in no way suggests that we can expect a breakout in either direction. EURUSD is likely to remain in this range for the time being. Considering that it is at the upper end of this range, a move down seems more likely. The break below 1.18 should confirm that the next down leg has started.

 

 

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Best Regards,
Philip
Senior Forex Manager
FX Trading Revolution
w: www.fxtradingrevolution.com 

e: philip@fxtradingrevolution.com