Euro higher on strong German retail sales

After a strong finish to 2020, the euro hasn’t missed a beat and continues to gain ground early in the new year against the struggling US dollar. EUR/USD is trading at 1.2274, up 0.17% on the day. On Monday, the pair touched a high of 1.2309, just shy of the 1.2310 mark, which is the pair’s highest level since April 2018.

German retail sales jump

Germany is the bellwether of the entire eurozone economy and is being counted on to lift the bloc out of the current difficult economic landscape. However, repeated lockdowns due to Covid-19 have hurt domestic activity and weighed on consumer sentiment. This made strong German data on Tuesday all the more important. Retail Sales, a closely-watched gauge of consumer spending, defied the expectations of a 2.0% decline for November. Instead, the markets were treated to an excellent gain of 1.9%. This follows a gain of 2.6% and marked the first back-to-back gains since February, prior to Covid-19. There was more good news as German unemployment claims fell for a sixth straight month. At the same time, the recovery may have to wait as Germany is set to impose further anti-Covid restrictions today, which will affect the economy’s performance.

US election time (again)

A runoff election is being held in Georgia to determine the makeup of the US senate. This election is being closely watched in the US and elsewhere, as the results will have tremendous implications for the United States. If the Republicans can win one of the two seats being contested, they will hold onto the Senate and can block the Democrats from enacting new stimulus programs and raising taxes. Conversely, a Democratic sweep of both seats means that the Democrats will control all three branches of government and will have a free hand at enacting sweeping new legislation. The stakes are high and with the election considered extremely close, we could see some volatility in the currency markets after the results are in. The markets have priced in the Republicans holding onto the Senate, and a shocking Democratic victory could propel the US dollar to higher ground, in the short-term.

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EUR/USD Technical

• EUR/USD is facing resistance at 1.2301. The next resistance line is at 1.2352
• There is support at 1.2208, followed by a support line at 1.2166
• The pair crossed above the 10-day MA line on Monday and remains above this line

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