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Andreas Zanin
Analysis | January 29, 2021

EUR/USD: outlook and research

Enclosed our updated view of EUR/USD which in our view will develop into a strong downtrend. We will look at the key technical levels and also a key fundamental to watch in relation to this pair COVID Infections V Vaccination Speed relative to economic growth going forward.

In our previous post on EUR/USD we noted that interest rate differentials and bond yields favour the USD and its economy is doing far better than Euro zones and the gap will widen as per our summary below but first the updated technicals:

In terms of the technicals we moved down from 1.2350 and broke the 1.2200 level as expected and we now see it as firm resistance to rallies – A downside breakout from the channel is expected to trigger a major decline as speculators hold their biggest long position since 2011.

COVID – Infections – Vaccinations – Consumer Spending & GDP

In terms of many European countries there still seeing rising infection rates and the vaccination programs are slow – over in the US infections are falling and vaccinations are going pace which will see the US economy which is already showing better growth than the EU increase the gap between the two economies further.

In terms of the US the rate of new COVID-19 cases in the US has fallen 40% from its peak in the middle of January. The chart shows the daily change in US COVID-19 cases with 7-day moving average;

The speed of covid-19 vaccinations in the US is gaining momentum  Thursday was the  biggest day so far with 27.3 million shots (averaging 1.26 million doses per day over the last week). The US according to Goldman Sachs could reach herd immunity before summer and economy will now in the second quarter start to see strong growth as the virus impact recedes and the large fiscal spending package from the Government gives the economy an additional momentum.

In terms of the consumer (which accounts for 70% of US GDP) spending has been holding up well and should firm later in the year.

The big long term fundamentals favor the USD over the EUR and short trades offer good risk to reward – rallies in our view are selling opportunities.

 

 

Research provided by LearnCurrencyTradingOnline.com

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