The euro kicked off 2017 with a dive to new 14-year lows amid fears about the French elections and the momentum the dollar had after the US elections. 2018 starts on a different note.
EUR/USD is up to 1.2043 at the time of writing, at the highest since September, nearly a 4-month high. It is only some 50 pips away from the 2017 peak of 1.2090. On the downside, we find 1.20, the round number, as a line of support. The previous peak of 1.1960 is the next in line, followed by 1.1910.
Here are the moves on the daily chart:
EUR/USD has reasons to rise
The main driver of the pair is the US dollar and its weakness. The end-of-year portfolio adjustment was probably not only an adjustment. It’s already 2018 and the greenback is on the back foot once again. We stressed the natural flows that help the euro when nothing happens. During the holidays, nothing usually happens and this year was no different.
We still didn’t get any fresh figures significant figures from both sides of the Atlantic, but trading volume is already rising back to normal levels.
Another reason for the fall of the US dollar is a correction and a “sell the fact” response to the tax cuts that were signed into law by Trump just before Christmas.
Prospects for the European economies look bright despite political uncertainty. Germany still doesn’t have a government and Italy will go to the polls soon in a highly uncertain round of elections. Nevertheless, the strong growth that was seen in 2017 and the understandable expectations it will continue propelling the common currency.
More: G10FX : 4 Key Themes To Drive FX Performances In 2018 – EUR/USD could rise