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It’s the last week of 2020 and we’re kicking it off with another look at EUR/USD. With a light calendar ahead and likely low volatility for now, there are a few technical setups to check out for potential short-term pips.

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Fresh Market Headlines & Economic Data:

Trump signs COVID-19 economic relief package

Dow jumps 300 points to record high as Wall Street kicks off last week of the year

EU ambassadors formally approve Brexit trade deal ahead of deadline

Oil steadies below $52 as U.S. stimulus counters weak demand

Fauci warns of post-Christmas surge in Covid infections

Upcoming Potential Catalysts on the Economic Calendar

U.S. Home Prices at 2:00 pm GMT (Dec. 29)

What to Watch: EUR/USD

EUR/USD 1-Hour Forex Chart
EUR/USD 1-Hour Forex Chart

It’s been a quiet start to the week so far, but with the markets leaning slightly risk on after Trump signed the signed COVID-19 economic relief package, U.S. dollar short plays may be the way to go for now.

On the one hour chart of EUR/USD above, we can see the pair continues the consolidation pattern from last week, still tightening around the 1.2200 handle. Unless we get a fresh catalysts for increased volatility, it’s likely that rising ‘lows’ pattern will draw in technical traders to play the short and longer-term uptrend.

Besides a retest of rising support, the falling ‘highs’ pattern marked on the chart above is one to watch for a potential long setup. If we get a catalyst for strong volatility, then an upside break will likely draw in momentum players, likely from the entire time frame spectrum.

With the right bullish catalyst (e.g., additional stimulus approved by the U.S. government, increased vaccine distribution, reports of lower COVID hospitalizations/case counts, etc.), a run to the 1.2300 handle is not out of the question within a session or two given the daily ATR of around 70 pips.

Of course, if s risk-off catalyst were to pop up (e.g., negative COVID-19 vaccine/mutation related headlines) then watch out for a break below the rising ‘lows’ pattern for a potential short position. End of year profit taking could occur in that scenario, so a strong downside play is not out of the question, especially given the beating the Greenback has taken in 2020.