EUR/USD is currently trading at 1.1829 between a range of 1.1779 and 1.1843, unable to capitalize fully on the vaccine news as the greenback struggles to gain territory.
The dollar is in focus this week, catching some of the market off-guard when it initially fell on the news of a covid-19 vaccine only to then rally across assets.
Volatility in the Eurodollar was immense on Monday on the headlines that Pfizer/BioNtech’s partnership has produced a vaccine that works 90% of the time in trials.
On Tuesday, the sell-off of the dollar helped reduce the decline in investor confidence in the euro. The German ZEW index fell from 56.1 to 39 in November, a sharp fall, worse than expected and reflecting fears of a double dip recession. This indicates the start of what should be a series of weaker economic reports, which will befall the single currency.
Also, blue-chip US tech companies have also come under pressure following overnight news that the EU has accused Amazon of breaching antitrust rules over its use of competitor’s sales data on its marketplace that could benefit the company’s own retail arm. The EU Commission will also investigate how Amazon chooses products for a prominent “buy box” that drives sales and may push retailers to use its own logistics and delivery services.
On the US Election front, traders are nervous about Trump’s attempt to overturn votes in Michigan and Pennsylvania. If his efforts are successful, it will reignite electoral uncertainty and risk aversion. Markets hate political uncertainty.
Our view on the EUR/USD is neutral for the rest of the week mainly on US Election uncertainty and US tech giant’s antitrust issues in the EU. Also, the Euro will have to take some losses taking into account the current lockdown measures in various countries, as this will suspend the economy of growing towards the Christmas season. A range strategy between 1.1900 and 1.1800 is in play.
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