The main news of the second week of November was not Joe Biden's victory in the elections, but the message of positive test results for the COVID-19 vaccine. The market responded with a boom in stock indexes and US Treasury yields, clearly demonstrating how it would behave if dreams of a former life became a reality. Yes, a little later it was understood that more than one month would pass from testing to vaccine introduction, but the markets are growing on expectations, which allows us to speak about the limited potential of EURUSD correction.

The euro has the prerequisites for strengthening despite the second wave of the pandemic in Europe, the restrictions imposed there, and the optimistic forecasts of the Wall Street Journal experts about the US economy. In their opinion, the US GDP will decline in 2020 not by 3.6%, as predicted in October, but by 2.7%. Most likely, the United States will be able to avoid a double recession, the risks of which hang like a sword of Damocles over the eurozone. If we add to this the ECB's intention to expand the monetary stimulus in December by at least € 500 billion, a natural question arises, why is the euro growing? The answer must be sought in the hope of defeating COVID-19.

Despite the pessimistic statements of the Fed officials, warning that the next few months will be very difficult for the US, business activity on expectations of vaccinations is able to continue the rally. If so, then bond yields will rise after it. Growth in global debt market rates is good news for EURUSD bulls.

Dynamics of global business activity and yields on US Treasury bonds:

Dynamics of EURUSD and bond yields:

Thus, the market believes that the glass is half full. Ignoring the facts that a lot of time will pass before universal vaccination and dreams of seeing a world without COVID-19. This is expressed in the desire to dump safe-haven assets, which leads to higher yields and a strengthening of the euro despite the difficult epidemiological situation in the rest of Europe, the risks of a double recession in the eurozone, and the ECB's intentions to be present not only in the first but also in the second wave of the pandemic.

This alignment of forces suggests a tendency for EURUSD to consolidate in the range of 1.16-1.2. So far, the European Central Bank has the strength to keep the bulls from advancing above the psychologically important level of 1.2. Both verbal interventions and hints of expanding quantitative easing programs will continue to be used. I do not exclude that Christine Lagarde and her colleagues will allow themselves to talk about cutting rates. Alas, they are unable to break the bullish trend in the main currency pair. Moreover, if Joe Biden begins to cancel the tariffs imposed by Donald Trump on imports from China, the euro will rush to $ 1.25.

Technically, a Broadening Wedge pattern was formed on the daily EURUSD chart. A rebound from the 50% Fibonacci level from wave 4-5 with a subsequent return above 38.2% could serve as a signal to buy. Now longs can be formed from the level of 23.6% or 1.1845. In doing so, you need to be extremely careful and keep in mind the potential reaction of the ECB to the approach of the pair to the level of 1.2.

EURUSD daily chart: