Look to buy EUR/USD on the dip to 1.1700 for 1.2240 with a stop below 1.1390
From the low of 1.0635 back on 15 March 2020, price went to a rally to reach a high of 1.2010 at the end of August 2020. After the high, price went into a consolidation after a 5-month rally. The consolidation has occurred around the 20EMA line which is rising and has a steep slope, hinting of a bullish price trend. The bullish price trend is likely to resume once the consolidation ends. MACD is still bullish and both of its lines are above the zero line. The fast line of the MACD indicators is also turning up from the zero line, which is a sign of an impending price rally. Stochastic is also moving towards the oversold zone but we are likely to see a bullish crossover soon, which is another hint of the bullish price trend resuming its upward journey again. The price rally could bring price to the next resistance point at 1.2240 in the next 3 months. The next target of 1.25 could be possible on a longer term basis as we see a weak US dollar for the next 12 months.
With a COVID-19 vaccine, risk to the coronavirus is reduced and the demand for the safe haven US dollar is likely to drop. With the result of the US election out and with no contested outcome, investors who had sought refuge in the safe haven US dollar are likely to move out of the safe haven US dollar in search of better returns. Besides the uncertain US fiscal policy, rising US government debt is likely to rear its ugly head and weigh on the US dollar.
With Biden as US president, investors are expecting a steadier US foreign policy which is likely to lead to a weakening demand of the US dollar as a safe haven. Investors are also hopeful of a more conciliatory approach to the US-China relationship.
With Biden expected to push through a bigger US stimulus relief package to help the US economy recover from the coronavirus pandemic, the US dollar is likely to weaken as a result. Beside fiscal policy, monetary policy from the Federal Reserve is likely to remain loose, where interest rate is likely to remain low for the next 1-2 years. With a narrow of its interest differential advantage, the US dollar is likely to experience less demand as a result.