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EURUSD: buyers set sights on 1.20

Virtually all major currencies closed the week higher. The New Zealand dollar notched up the steepest gain against the US dollar (+1.30%). Smaller increases were recorded by the Australian dollar (+1.02%), the euro (+0.90%), the Canadian dollar (+0.78%), the Swiss franc (+0.73%), and the pound sterling (+0.17%). On the other side of the FX spectrum, the Japanese yen slid 0.21%.

The EURUSD pair traded to the upside on Friday, November 27, with the single currency climbing 0.42% to 1.1962 on the day. Buying was supported by euro cross pairs. The key pair rallied later during the North American session after the pound sterling took a hit.

GBP declined against the euro and the dollar as the EU and the UK reported substantial differences that cast doubt on a post-Brexit trade deal in the run-up to the end of the transition period on December 31, 2020. The EURGBP cross pair spiked to 0.8955, on the news, while the euro soared to 1.1963. GBPUSD dropped to 1.3285.

Buyers also got a boost from appreciation of the aussie and kiwi, which rallied on the back of robust Chinese macro data. China's industrial profits rose for the sixth consecutive month in October and at the fastest pace since early 2017.

Todays macro agenda (GMT+3)

  • 12:30 UK: M4 money supply, mortgage approvals and lending (October)
  • 13:30 EU: ECB President Lagarde speech
  • 16:00 Germany: CPI (November)
  • 16:30 Canada: building permits (October), current account (Q3), PPI (October)
  • 17:45 US: Chicago PMI (November)
  • 18:00 US: pending home sales (October); Eurogroup meeting of oil-exporting countries

Current outlook

Asian trading opened with a decline in the DXY amid falling US treasury bond yields. Major currencies are trading slightly higher. Gold has dropped to $ 1,764/oz on optimism over a Covid-19 vaccine.

At the time of writing, the euro was quoted at 1.1966, off an intraday high of 1.1976. Given that the European currency closed higher amid muted Friday trading, today we expect to see EURUSD make a move against Friday’s trend. Asia took its cue from the North American session. FX players are now waiting for London trading to open.

If the price action starts to move downward at 8:00 GMT, and a negative dynamic persists for three hours, then we can expect the euro to weaken to 1.1920 (45-degree line). The 1.1942 trendline will act as interim support.

If the decline in EURUSD stalls at 1.1955, market participants would be advised to look at the crosses. If they are supportive, buyers will attempt to muster a breakout to 1.2015. Also watch for Christine Lagarde’s speech, even though it may not exert an impact on the market.

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