EUR/USD: Three dark clouds loom to suggest a deeper correction

The grand profit-taking has finally happened – but it may not be over so fast. While EUR/USD is off its highs and has the basic reasons to rise, three worries could extend its downward correction, according to FXStreet’s Analyst Yohay Elam.

Key quotes

“The lapse of several federal programs and the increase in COVID-19 cases and related restrictions took its toll on America's labor market. Investors saw this as ‘bad news is good news’ – hoping that the weak data would push lawmakers to agree on a relief package worth around $1 trillion. However, Senate Majority Leader Mitch McConnell seems reluctant to agree on anything worth more than $500 billion. Ongoing uncertainty could weigh on sentiment and boost the safe-haven dollar.” 

“President Donald Trump continues pounding China on the way out – and that is an area where there is little controversy with President-elect Joe Biden. He is reportedly backing a proposal to sanction an additional 14 senior Chinese officials. The world's largest economies signed a trade deal early in the year and further tensions could tear it apart.” 

“The EU and the UK continue clashing over a Brexit deal with only some three weeks to go until the transition period ends. UK Prime Minister Boris Johnson is reportedly ready to ditch talks ‘within hours’. If negotiations conclude on Monday, the common currency could further fall.”