The United Kingdom has become the first country in the world to approve the Pfizer/BioNtech Covid-19 vaccine!

This emergency authorization marks a historic moment and clears the way for the deployment of a vaccine that is expected to play a critical role in halting the coronavirus outbreak. Given how the vaccine will be available in Britain from next week, this opens the way for mass immunisation and raises the prospects of the European Union and the United States making a similar move.

Such encouraging news is poised to elevate global risk sentiment as investors become increasingly optimistic over the vaccine speeding up the pace of economic recovery. Equity bulls may be injected with a renewed sense of confidence amid the good news while safe-havens like the Dollar, Japanese Yen and Gold are positioned to weaken.

Battered Dollar gets no love

The Dollar descended deeper into the abyss on Tuesday evening as cautious optimism that the United States will revive stimulus talks fuelled risk appetite. News that the United Kingdom has approved Pfizer’s Covid-19 vaccine weakened the currency further.

Over the past few weeks, there was no love for the Dollar thanks to positive vaccine news, mixed economic data and surging coronavirus cases in the United States. The latest developments regarding U.S Treasury Secretary Steve Mnuchin and House of Representatives Speaker Nancy Pelosi holding fresh stimulus talks have offered some light at the end of the long tunnel. However, markets remain skeptical whether these talks will open the doors to more stimulus, since investors were already left empty handed before the presidential election. Nevertheless, the idea of the United States unleashing further stimulus in 2021 to support the economy has dragged the Dollar Index (DXY) to levels not seen since late April 2018.

The outlook for the Dollar Index remains bearish as the fundamentals and technical align. After experiencing its worst month in November since July, the Dollar has entered December under intense pressure.  Looking at the technical picture, prices have tumbled roughly 0.7% since the start of December and almost 3% this quarter. The DXY is trading around 91.19 as of writing with bears eyeing the 91.00 support level. A solid breakdown below this point could open a path towards 90.00. Alternatively, prices may experience a technical bounce back towards the 92.00 resistance before bears jump back into the game. This bearish setup becomes invalidated once a weekly close above 92.00 is achieved.

EURUSD blasts above 1.2000

In our FX Week Ahead report on Monday, we discussed the possibility of the EURUSD breaking above the 1.2000 psychological resistance level.

The solid breakout and daily close above this key resistance are likely to signal a move towards levels not seen since April 2018 above 1.2150. Should Dollar weakness remain a key theme in December, this may inject Euro bulls with enough inspiration to challenge prices beyond 1.2150. Although the outlook points north, a move back below 1.2000 could signal a decline back towards 1.1900.

GBPUSD secures daily close above 1.3400

It’s not only the Euro that has welcomed a weaker Dollar. The GBPUSD jumped over 100 pips on Tuesday to close above 1.3400. While prices could push higher in the near term, the medium to longer term outlook remains heavily influenced by Brexit. As the clock ticks closer to the official Brexit transition deadline on the 31^st of December, the GBPUSD is likely to turn volatile and sensitive. Focusing on the near-term outlook, the upside momentum may drive prices towards 1.3520

AUDUSD find support above 0.7340

Expect the AUDUSD to push higher if the Dollar continues to weaken. Such a development could open the doors towards 0.7413.

Should 0.7340 prove to be unreliable support, the AUDUSD may decline back towards 0.7250.