EUR/USD Weekly Outlook – December 31, 2020

Last Updated on January 4, 2021

EURUSD Forex Forecast

Introduction

The EURUSD turned green across CFD brokers such as BinaryCent after recording new highs. US stimulus and BREXIT creates weakness for the Greenback and strength for the Euro.

Read on for more news and analysis on the Euro vs. USD.

EURO and US News

The Euro attained heights that have not been seen in two and a half years following a positive outlook on a possible recovery in global economies.

Also, government bond yield in the Eurozone increases by roughly one or two basis points.

Wall Street shares correct new highs following an increase in uncertainties concerning additional stimulus authorization by the US Senate.

The Greenback struggles as investors are more risk-averse on the USD and opt for riskier currencies.

COVID-19 immunization campaign begins in many countries, and the US fiscal support shines a positive light on global economies.

Paired against a basket of currencies, the USD Index (DXY) records a 0.29% loss. Such sluggish movement in the USD gave confidence to gold XAU, and trading at $1885.40 an ounce.

Investors hope that a US aid stimulus may boost demand and gas and possible economic growth, leading to an overnight rebound in Oil price. The US West Texas Intermediate crude traded at 48.11 USD/barrel.

The US Treasuries traded sideways with the 10-YR yield at 0.9347% and 2-YR yields at 0.1289%.

EUR vs. USD Long-term Objective: Bullish 

EURUSD Technical Analysis

Monthly Chart

EURUSD Monthly Chart - December 31 2020

The EURUSD continues to increase upward momentum as the exchange rate tears through the resistance zones of 1.2558 and 1.21545.

We expect a slowing of the bullish swing in the early weeks of 2021 as the RSI builds” bearish divergence.

Weekly Chart Bullish

After setting support at 1.16124 and exiting the correction phase by a price close over the 1.19207 area, the EURUSD exchange rate continues to set new highs.

As revealed on the DXY (US dollar Index), a weak US dollar confirms an inverse correlation with the EURUSD, considering that it is the most traded and most liquid in the industry.

Daily Chart Projections: Bullish 

Daily Resistance Level: 1.23099

Daily Support Level: 1.16234, 1.17456, 1.18003, 1.22530, 1.23099

A hidden bullish divergence chart formation on the daily time frame indicates a continuation of the uptrend established on November 05, 2020, after the relative strength index entered the overbought area.

Bullish Scenario:

As the EURUSD stays in the overbought area of the daily and monthly time horizon, we expect the bullish trend to remain stable. 

However, uncertainties from new waves of the Covid19 pandemic and a swearing-in of President-elect Joe Biden in a couple of weeks may sway investors’ confidence in the Greenback direction. So we suggest considering locking in profits at these high levels.

Bearish Scenario:

Although the USD Index shows a weak US dollar. We anticipate a bullish divergence setup on the higher time frames, which may kick in at the early part of Q1 2021. A strong correlation between the DXY and the EURUSD means we should expect a slowing of the Euro and perhaps a comeback for the USD.

Conclusion and Weekly Price Objectives

A stronger Great British Pound (GBP) will send negative sentiments in the EUR following trader and investor speculations around BREXIT. The EURGBP shows strong resistance around the 0.92795 level.

James S. Martin
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