FX.co ★ EUR/USD: Breakdown of the 1.2100 level will open new highs

The markets were surprised by the sudden growth of the EUR/USD pair above the psychological important level of 1.2000, although experts already assumed such a situation. Now, experts expect the pair to further rise, which managed to gain impulse despite the US dollar's weakness.

After surpassing the first wave of surprise, market participants tried to take advantage of the situation. The US currency surrendering its positions caused alarm. In turn, the euro had a second break through. Last night, the EUR/USD pair broke the high (1.2080) which was recorded in April 2018 and went into an upturn. Euro's immediate growth in relation to the US currency, expanded the scope of the current trading range. According to experts, a new upward trend opened the way for the pair to the level of 1.2500.

Today, the EUR/USD pair not only consolidated in a new range, but also steadily moved around 1.2120-1.2121. The euro is still dominating, but its leadership makes the ECB worried. Earlier, the regulator noted a negative impact on the economy due to euro's price growth. The European Central Bank believes that the strengthening of this currency hinders exports and contributes to deflation in Europe.

Therefore, experts do not exclude that the regulator will take measures to curb euro's growth in the near future. At the same time, many are confident that the ECB will not gradually lessen the quantitative easing (QE) program or cut interest rates. Bank of America's currency strategists believe that the regulator's ability to cut rates is limited, and so, ECB's current policy will not be able to dramatically change the dynamics of the national currency. However, some experts think that the regulator's financial assistance to large banks will affect the EUR positively. If the current situation persists, the EUR/USD pair will simply remain in the range of 1.2000-1.2500 not only at the end of 2020, but also next year.

The current week was a failure for the US currency. Today, experts recorded massive USD sales. What worsens the situation are reports of continued fiscal stimulus in the US. Earlier, the US authorities made a proposal to adopt a new stimulus package in the amount of $ 908 billion, but at the same time, new measures of financial support in the amount of $ 1.4 trillion are possible from the US Congress. The disappointing macroeconomic report from the Institute for Supply Management (ISM) also added pressure on the dollar. Last month, the purchasing managers' index (PMI) for the American manufacturing sector fell from 59.3 points to 57.5 points, based on the new data from the ISM. This caused a serious problem for the USD dynamics, which is now on the defensive. However, analysts believe that the US dollar will last until the end of the year by protecting itself.

As for the euro, experts believe that breaking through the level of 1.2100 will open the way to new peaks. They are sure that the euro will manage to reach new highs, despite ECB's current monetary policy. However, the current situation is testing the dollar, which may plummet any time. Therefore, the US dollar should do its best not to decline, which is very difficult to stop.