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EUR / USD: European currency recovers from Monday losses

The EUR / USD pair is recovering positions lost on Monday and is trading up by 0.12%.

On Monday, the US dollar strengthened sharply against other currencies after the publication of unexpectedly very strong preliminary data on PMI of the manufacturing and services sectors. Indicators not only did not decline as experts expected, but showed quite good growth, despite the pandemic. Manufacturing PMI rose from 53.4 to 56.7 points. The service sector PMI rose from 56.9 to 57.7 points. Thus, the PMI of the manufacturing sector reached its highest level since mid-2014. Services PMI is at its highest since 2015.

 

Today, the dollar index is trading in the red as the market is experiencing heightened investor risk appetite. Demand for the dollar, Japanese yen, gold and other defensive assets is declining.

 

Investors' optimism is primarily associated with reports of the high efficiency of the developed vaccines against coronavirus and the imminent start of their use in the US and EU countries. In Europe, the UK plans to use the new vaccine first. Earlier, some media reported that the vaccination program could begin as early as December 1. Other EU countries plan to start the vaccination process in the second half of December - early January next year.

 

An additional factor of support for the European currency is the positive expectations of investors regarding the Brexit negotiations. Most investors remain confident that the parties will be able to reach a compromise at the last moment and a trade agreement will be signed.

 

Today, in the economic calendar, we follow the news from Germany (GDP for the 3rd quarter and indices from the IFO institute) and the USA (consumer confidence index CB).

 

Yesterday the currency pair made a false breakout of the upper and lower boundaries of the horizontal channel 1.1815-1.1890. Now the price is in the middle of the flat, which increases the uncertainty in the market. With almost equal probability, the price can continue to move both up and down. In the current situation, to make trading decisions, you should wait for the price to rise or fall to one of the channel boundaries at 1.1815-1.1890.

 

  • Resistance levels: 1.1890, 1.1920, 1.2010.

 

  • Support levels: 1.1815, 1.1785, 1.1700.

 

The main scenario is a retest of support at 1.1815 and an increase to 1.1890.

 

Alternative scenario is growth to 1.1890 from current levels.

 

The current fundamental outlook is moderately positive. We still prioritize longs with entry points near the level of 1.1815.

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