EUR/USD Hits a New High, Up Over 4.00% in 30 Days

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Principal Points

• Euro bulls seek their way out of the consolidation zone
• The EUR/USD pair highlighted as one of the leading performers

The EUR/USD currency pair is one of the best performers in the currency market for November. For the last 30 days, starting Nov 3 to date, the pair has increased in value by over 4.00%. The strong rally we’re seeing in the EUR/USD peaked above a 32-month high as the last time the price reached current levels was on April 30.

EUR/USD is currently trading at 1.2121 as we enter the early trading hours of the European market. Euro bulls had to take over strong resistance levels along the way. Most recently, they had to battle their way out of the consolidation zone as the pair was stuck for the last three months between the lines of 1.1600 and 1.1940. This week’s breakout comes as a solid confirmation that the pair has broken out of the previous resistance and market participants now have new horizons to place their bets.

Throughout 2020 to date, the EUR/USD pair has gained 8.50%, which is more than the rise in the Dow Jones but less than the gains in gold or bitcoin. For the record, 2020 gains for the Dow Jones Industrial Average amount to 5.4%, while gold is up by 21% and bitcoin is higher by over 190% to date. However, it has to be noted that these are different asset classes affected by a variety of factors and risk appetites.

Nonetheless, the significant move in the EUR/USD for 2020 has put the pair as one of the top performers for the year with gains rivalled by few among the major currency pairs. A close competitor is the EURCAD, which posts gains at 8.00% year to date.

The US Dollar Devaluation Leads to Appreciation

The devaluation of the US dollar across the board has been one of the leading factors for the appreciation of the pair. The US dollar has decreased in recent months as investors rotated to US equities which were heavily discounted right after Covid-19 hit and the wheels came off the market in March. The EURUSD pair is higher also due to stronger Eurozone data as of recent reports and a decline in new coronavirus cases across Europe.

Traders and investors are now looking ahead to December 10 when the European Central Bank is expected to announce more stimulus measures for the European economy. In this light, the EU needs to find a way to approve the proposed €1.15 trillion seven-year budget and the €750 billion European recovery fund. Both have been vetoed by Hungary and Poland as the countries that are opposed to the rule-of-law conditionality that the EU has adopted. The adoption of the regulations proposes that if a new agreement on a new budget is not reached, the current budget which expires at the end of 2020 will be extended through 2021. Market participants will be watching closely the EU’s response to the challenge posed by Hungary and Poland as the funds that are being withheld are crucial for the sustainable development of the European economy and the evasion of a double-dip recession as we approach the end of Q4 2020.

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