The ECB failed to halt the bullish trend of the euro/dollar pair. It is highly possible that Brexit, the US Congress, and the Federal Reserve will accomplish this mission. The face-to-face meeting between the UK's Prime Minister and the President of the European Commission did not bear fruit. However, most politicians had hoped that the meeting would have settled the situation. As a result, the pound sterling drifted lower and the euro suffered in sympathy with it. Moreover, the Senate may also push the currencies lower. The fact is that Senate Majority Leader Mitch McConnell does not support the fiscal stimulus package. The US Fed may also worsen the currencies' performance.
The ECB's decision on its asset-purchasing program was quite predictable. The central bank expanded its massive monetary stimulus program by another 500 billion euros. The ECB also extended the horizon for purchases under the PEPP to March 2022. During the recent press conference, Christine Lagarde's rhetoric seemed "hawkish". She said that if financial conditions in the eurozone improved, there would be no need to use the program fully. Unlike her predecessor Mario Draghi, Christine Lagarde seems to take into account the view of the opposition headed by Bundesbank President Jens Weidmann. The euro reacted with a rise. However, news from London spoilt the bullish sentiment.
After the meeting with Ursula von der Leyen, Boris Johnson said that it was necessary to get ready to a solution much more like Australian relationship with the EU than a Canadian relationship. The parties are likely to use duties on the principles of the WTO. This means that there will be a no-deal Brexit. At the same time, in the US, Democrats and Republicans also cannot agree on the fiscal stimulus package. Stock markets believed that consensus would be reached in the near future. However, there are a lot of politicians who do not support the idea.That is why the S&P 500 began falling. A downward correction in the stock market and the pound/dollar pair may result in a slide in the euro/dollar pair. Thus, it is quite possible that the ECB will manage to weaken the euro by means of other countries.
However, there are still traders who want to buy US debt securities and the euro. The situation may develop according to the scenario of 2017. Then, the main currency pair managed to resume rising after reaching the important level of 1.2.
Dynamics of EUR/USD in 2017 and 2020
It is highly possible that London and Brussels will continue negotiating in 2021. In this case, the EU's agreement on the €1.8 trillion package, including the 750 billion euro recovery fund, could boost the euro.
The US Fed's meeting on December 18 will be the key event of the upcoming week. The purchase of longer-term bonds is considered a monetary easing, which should potentially hit the US dollar. However, if the regulator supposes that mass vaccination may improve economic prospects, there is no need to switch to monetary expansion.
According to the technical analysis, the euro/dollar pair is likely to continue rising. Thus, a drop to such support levels as 1.2075, 1.2035, and 1.196 could become a good signal to open long positions. The fact is that the pair may rebound from these support levels and resume gaining in value. The initial targets are located at 1.221 and 1.224.
EUR/USD, daily chart