The EUR/USD pair lost 70 points last night compared to Friday's closing, which is quite a lot in the current conditions. A new and rather powerful fall began after the markets began to work out information about the new coronavirus in the UK. If you remember, at the very beginning of the pandemic in March, the US dollar also rose in price like crazy. This is due to the desire of traders and investors to transfer their assets to the safest currencies from the risky ones. For a long time, the yen and franc were considered the safest, but now the dollar is also worth it. The euro and pound are considered risky. Thus, as soon as the news about a new coronavirus hit the markets, risky currencies immediately began to fall. However, at the moment it is purely corrective for the EUR/USD pair. The rising channel remains, which means that the rising trend is still present. A price rebound from the lower boundary of the channel will be a signal to bring back the upward movement and a buy signal. A strong signal for forming a new downward trend would be when the pair's quotes leave the channel. Unfortunately, novice traders find themselves in a storm once again. For example, it was difficult to predict that a strong fall would begin at night. And in any case, trading down on a strong upward trend is not advisable.
No major macroeconomic publications or other events scheduled in the European Union and America today, Monday, December 21st. However, it is already clear which topic will be number one in the last days of the outgoing, crazy 2020. A new mutation of coronavirus when humanity has just barely created a vaccine against its main strain, it's like a blow in the stomach in boxing. If the new strain, which is already called 70% more infectious, also develops as the main COVID-2019, then the planet and humanity will not return to normal for a very long time. The UK is already closing its borders and it is unlikely that this strain will be isolated only there. If it breaks out, then the whole world can get acquainted with the new strain and the word will again be given to virologists and doctors. How long will it take to develop a vaccine against a new strain, and how many such strains can there be? As you can see, the COVID virus mutates quite easily...
Possible scenarios for December 21:
1) Long positions remain relevant at the moment, as the upward trend continues. The price has dropped to the lower border of the rising channel for now. A rebound from it will serve as a signal to buy the pair while aiming for 1.2231 and 1.2251. However, now we need to understand how seriously the markets will take information about the new strain of COVID and how long they will be ready to process this information.
2) Trading for a fall does not look practical, from a technical point of view, but logical, from a fundamental one. If a new mutation begins to spread at the same rate as the main COVID a year ago, then all markets in the world will be in a disarray again. Panic among traders, a new drop in demand for oil and energy resources, new lockdowns, everything will suffer again, and very hard. And in this case, the dollar's growth may again be strong and protracted. Closing below the channel will signal sales with targets at 1.2150 and 1.2100. Novice traders should decide for themselves whether they are willing to take the increased risks when opening short positions after the pair has already moved down 70 points.
