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18.01.2021 11:35 PM
Selling or buying euros?

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The European currency is not going through its best days. It moved away from recent highs above 1.23 against the dollar. The euro continued to decline on Monday, feeling pressure from both the dollar and the difficult situation with the coronavirus. Despite the fact that there are quite tough lockdowns in Germany, the country's statistical agencies continue to publish alarming figures and report a record number of deaths.

German Chancellor Angela Merkel has once again called for all necessary measures to counter the spread of a new strain of coronavirus. As the country is expected to tighten quarantine measures, the risks of further contraction of economic growth in the euro area in the first quarter are increasing.

The EUR/USD pair may strengthen the downward correction if the spread of the vaccine in the eurozone continues to disappoint, analysts say. Failure to scale up vaccination will certainly weaken the euro's position. However, the decline should be short-lived and moderate.

It was a typical Monday for the EUR/USD pair, since the US is celebrating a national holiday and trading is not carried out. Traders of the main pair will be interested in Tuesday. Janet Yellen is expected to speak, and on Wednesday, Joe Biden will officially take office as President of the United States.

The balance of power can change. The current situation speaks in favor of EUR/USD sellers. The dollar was actively rising on Monday, but its growth is extremely illogical. Friday's statistics turned out to be much worse than the forecast, while the dollar chose to ignore the pessimistic report. Washington continues to prepare for the inauguration of the president, unprecedented security measures are unfolding on the streets. Donald Trump announced that he will not attend the inauguration.

Analysts at Bank of America, assessing current and future events, expect the euro to fall to 1.20. They also called it a good opportunity to open long positions.

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The technical picture suggests otherwise. The euro showed a steady decline against the dollar. Moreover, the fall in the exchange rate occurred on a large volume. This suggests that large players are interested in short positions. It is also worth paying attention to the new resistance level, which is the range of 1.2108-1.2115, where a large volume is concentrated.

Given these factors, the downward trend in the euro may continue.

As for the pound, the bets of large speculators on its growth against the US currency reached record levels since March. At the same time, the GBP/USD pair itself is currently much higher than pre-crisis levels. The optimism of the players is due to the fact that the UK is quickly vaccinating the population, and the rather exhausted topic of Brexit has left the agenda.

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Natalya Andreeva,
Analytical expert of InstaForex
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