EUR/USD: Fundamentals point to a growing chance to burst above 1.20

EUR/USD has kicked off the week under 1.20 as US yields fall. Is the fifth attempt to break above 1.20 going to be different than the previous ones? Yohay Elam, an Analyst at FXStreet, lays out the bullish case.

Rising vaccination rates in Europe may boost the common currency

“The good news for the old continent is that the vaccination campaign has picked up and bottlenecks seem to have been removed. Nearly 25 doses have been given per person – or nearly 20% have received at least one shot. The EU will receive 50 million additional Pfizer/BioNTech doses in the second quarter and the issues with Johnson & Johnson's single-shot inoculations may be removed shortly. The faster vaccination rhythm is far from being priced into the euro.”

“Demand from the US consumer has ripple effects and may also boost the European economies. In the nearer term, such a ‘risk-on’ mood is positive for the currency pair.”

“One source of worry is the political impasse in Germany's ruling CDU/CSU bloc. Armin Laschet and Markus Söder have been clashing on who will replace Chancellor Angela Merkel as chancellor candidate. However, a quick resolution is likely as early as Monday.”

“Above the critical 1.20 level, the next levels to watch date to March and February, and include 1.2025, 1.2065 and 1.2115.” 

“Support awaits at the daily low of 1.1945, followed by 1.1925 and 1.1860, which accompanied the pair during its recent ascent.”