USD Deteriorates on Revived Stimulus Optimism As Euro Spikes

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Investors started the week with close attention to the US stimulus and Brexit, but both showed no progress as the US session draws to a close.

The dollar and yen are under significant selling pressure again today. U.S. investors seem to be ignoring the continued rise in global coronavirus cases, which have surpassed the 40 million mark. Instead, there is renewed hope for new fiscal stimulus as House Speaker Nancy Pelosi said a campaign deal remains possible. Meanwhile, the UK and the EU are resuming Brexit talks.

As for the U.S. coronavirus relief package, House Speaker Nancy Pelosi has set a 48-hour deadline for the deal. Hopes for progress were dashed in the middle of the day in the US amid headlines indicating that Democrats believe great divisions persist. The dollar fell against most of its major rivals, recovering unevenly during the American session.

On the other hand, the Chinese economy also showed some optimism.
Although commodity currencies seem to be left behind as the euro and pound are the strongest. Technically, the EUR/USD break of the minor resistance at 1.1771 is canceling out the short-term bearish sentiment.

Attention is again focused on the minor resistance at 1.1830 and a breakout would retest the 1.2011 high. Likewise, a break of the 1.3082 resistance in the GBP/USD pair could lead to a retest of the 1.3482 high. A break of the 0.9087 support in USD/CHF will retest the 0.8998 low. Ideally, a full return to the dollar bears should be accompanied by a breakout of the resistance of 1933.17.

ECB Lagarde: It Is Important to Avoid Stimulus Negative Impacts
ECB President Christine Lagarde said the recovery from the coronavirus pandemic “remains uncertain, uneven, and incomplete.” In addition, “the new coronavirus-related restrictions currently being introduced across Europe will add uncertainty for companies and households.”

Lagarde stated that “financial and monetary policy support should remain in place for as long as necessary, and ‘clipping effects’ should be avoided.” Separately, Governing Council member Klaas Noth said: “At the moment, I do not see any factors on the horizon that would make me think that interest rates will change significantly in the coming years.”