Despite rising US yields, EURUSD still well above 1.1600 – 1.2000 into the yearly close?

By Admiral Markets

Source: Economic Events November 13, 2020 – Admiral Markets Forex Calendar

On Monday, after Pfizer/BioNTech announced that they are on their way to a Covid-19 vaccine that is effective in preventing the virus in over 90% of cases, US yields spiked to their highest levels since March 2020, eyeing the 1.00% mark.

Main reason was certainly that market participants saw chances of a massive fiscal and further monetary stimulus dropping. As a result Gold sold off sharply and a potential sector rotation from growth to value stocks set in.

But what’s especially noteworthy: EURUSD saw an initial push above 1.1900, dropping only with a delay of several hours towards and slightly below 1.1800 in the days to come.

That’s not just noteworthy, but surprising. The spike higher in US yields and resulting US-Dollar strength can in fact only mean one thing: market participants are still convinced that we are far from returning to “normal”, especially from an economic standpoint.

That said, chances of a massive fiscal package to stabilize the US economy and an ultra-dovish approach from the US central bank FED to finance that fresh US debt are probably still on the table, which was underlined by FED chairman Powell last week at the FED meeting on Wednesday.

While the picture in EURUSD remains choppy as long as we trade below 1.1900, but above 1.1600, we will remain positive for the currency pair, expecting a break higher, direct follow through to 1.2000 and a deep run beyond the 1.2000 mark in the 6 to 12 months to come.

Even if we get to see a short-term USD relief rally and break below 1.1600, we consider the region between 1.1400 to 1.1500 interesting, risk-reward wise, and could anticipate our expected break to above 1.2000:

Source: Admiral Markets MT5 with MT5SE Add-on EURUSD Daily chart (from August 07, 2019, to November 12, 2020). Accessed: November 12, 2020, at 10:00 PM GMT. Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the EURUSD fell by 10.2%, in 2016, it fell by 3.2%, in 2017, it increased by 13.92%, in 2018, it fell by 4.4%, and in 2019, it fell by 2.2%, meaning that in five years, it was down by 7.3%.

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