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The main currency pair is still trading in a narrow range (1.1820-1.1900), fluctuating between growth and decline.

Apparently, market participants are trying to reflect on two very different news events in quotes. On the one hand, reports of progress in developing a coronavirus vaccine are unequivocally positive; on the other, the distribution of the vaccine is a matter of months or quarters. Therefore, in the short term, concerns about the growing number of COVID-19 cases in the world and the deterioration of the global economic outlook are dominating, and investors are in no hurry to abandon the dollar.

“The immediate risks associated with an increase in the number of coronavirus infections in the eurozone have become too great to ignore,” said strategists at DBS Bank.

Over the past day, more than 187,000 new cases of COVID-19 have been reported in the United States, the highest daily increase since the start of the pandemic.

At the same time, thanks to the adopted restrictive measures in the EU, the virus is spreading more slowly. If the European authorities manage to reverse the situation before Christmas and resume business activity, albeit in a limited time, the growth of the euro will be justified, which, in fact, is what fans of the single currency are counting on.

“Pfizer, BioNtech, and Moderna may receive conditional approval to sell their COVID-19 vaccines in the EU in the second half of next month,” Bloomberg reported, citing comments from European Commission President Ursula von der Leyen. This is positive news for the euro.

After a number of pharmaceutical companies reported that the coronavirus vaccine they are developing has shown high efficiency in clinical trials, the protective asset greenback went under pressure and sank to 92 points, it went briefly below this level at the end of August.

According to Deutsche Bank, the coronavirus vaccines are equivalent to a global financial stimulus.

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The US dollar lost about 11% from its March peak as risky assets benefited from stimulating monetary and fiscal policies by central banks and governments around the world to contain the economic impact of COVID-19.

“The scenario of USD decline remains quite probable. Many expect the political stalemate in Washington to be most likely offset by the Fed’s ultra-soft policy, which provides sufficient liquidity to keep the dollar under pressure. Hence, the FOMC meeting on December 16 is of decisive importance,” said experts at Saxo Bank.

“However, it is not yet clear whether the Fed is ready to move to a more “dovish” policy, because the regulator’s calls for fiscal measures can be considered a statement about the ineffectiveness of expanding the quantitative easing program. The financing conditions are already extremely soft, so from this side, there is also no convincing argument in favor of QE. Therefore, it is possible that the market hopes in vain for the “dovish” measures of the Fed after the December meeting,” they added.

Meanwhile, clouds are gathering over the euro in the form of possible threats to the EU’s existence, which again arise due to problems with the alliance’s budget.

Earlier, Poland and Hungary vetoed the seven-year EU budget and the accompanying recovery package.

The video conference of the EU leaders held the day before did not resolve this issue.

If the market senses a problem with the EU budget and the risk of conflict with Poland and Hungary, then the decline will be the path of least resistance for the euro.

“The EUR / USD pair held above the support of 1.1808. Next, it should test the resistance at 1.1903. However, only a rise above 1.1920 will confirm that the consolidation that has taken place since the beginning of September ended and the pair resumed its growth with the target at 1.1962-1.1966 and further at 1.2011 and 1.2145-1.2155. Immediate support was moved to 1.1864, the next one is at 1.1832-1.1842. A breakdown of the level of 1.1808 will aim the pair at 1.1788 and 1.1725-1.1745,” said Credit Suisse.

The material has been provided by InstaForex Company – www.instaforex.com

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