Logo

Posts

US dollar price forecast 22 December 2020

2020-12-22

2020-12-22

Antidepressants harm the Dollar. EURUSD forecast 22.12.2020Dmitri Demidenko

The return of hopes for a successful Brexit, the fact that the US Congress passed the COVID-19 aid bill and the soothing rhetoric of the WHO quickly brought the euro back to life. Will [EURUSD][1] continue to rally? Let’s talk about this and create a trading plan.

US dollar fundamental forecast for the quarter

More like an antidepressant than a stimulant. First, the House of Representatives and then the Senate approved an $892 billion fiscal stimulus package. And even if the deal between Democrats and Republicans is not a panacea for the US economy (too late to avoid its slowdown in the first quarter, and, most likely, not enough to eliminate the long- term damage from recession), but a little something is better than nothing. The fact that Congress passed the bill, coupled with good news about Brexit, allowed the [EURUSD][1] bulls to quickly return the pair back above the base of the 22nd figure.

Thin market and a fair wind, what could be better for the euro fans? After the quadruple witching day, liquidity in the financial markets falls, investors are preparing for Christmas and postponing strategic plans to a later period. At the same time, the fiscal stimulus, the amount of which roughly corresponds to the gap between the current and potential size of the US economy (if there were no recession), is likely to support the global risk appetite.

Dynamics of the US economy

Source: Reuters.

And yet the main good news for the [EURUSD][1] bulls came not from the New, but from the Old World. The positions of Britain and the European Union on fisheries are becoming closer, which may increase the chances of successful Brexit before the end of 2020.

As with most divorces, money is the main stumbling block. How much is the EU willing to pay out of its €650 billion in annual revenues for European fishermen to access the waters of Great Britain? And for how long will this access be provided? Initially, London wanted 80% and 3 years, then lowered its demand to 60%. Brussels offered 15-18% and 8 years, a little later it generously offered 25% and 6 years. Finally, according to an insider from the Financial Times, an option has emerged on the negotiating table that may suit both sides. 35% and 5 years. The market smelled a successful Brexit in the air, the pound soared above $1.34, and the [EURUSD][1] bulls used their chance to buy the euro at a cheaper price and support the upward trend on the main currency pair.

The WHO has also contributed to supporting the high global risk appetite, which said the new COVID-19 strain found in Britain is less transmissible than other diseases such as mumps; mutations of the coronavirus occur less often than those of the flu, and the vaccines will be able to cope with all of them. If vaccinations are carried out on schedule, then by the second quarter of 2021 the economic activity will return to normal levels, which does not please the fans of safe- haven assets which include the US dollar.

Trading plan for [EURUSD][1] for the quarter

As I noted earlier, traders have to see unsuccessful Brexit and problems with the passing of the fiscal stimulus package through Congress to count on a [EURUSD][1] correction. Bears now have to dream about bulls taking profits from longs on the S&P 500, pound sterling and euro made thanks to the “buy the rumour, sell the news” principle - only then the bears could hope for a short correction. In general, the trading concept for 2021 remains the same. The victory over the pandemic, the explosive growth of the world economy and international trade and the associated sale of safe-haven assets will let the main currency pair to rise to 1.25.

Price chart of EURUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Rate this article:

{{value}}

( {{count}} {{title}} )

  1. my.liteforex.com/trading/chart?symbol=EURUSD&returnUrl=true