EUR/USD: Three reasons why the dollar has more room to rise

EUR/USD has stalled its upward move in what seems like more than a correction. Yohay Elam, an analyst at FXStreet, points out three reasons why the dollar may extend its gains

Key quotes

“The Phase One trade deal remains intact – and that is what matters to markets. Negotiators from the world's largest economies will meet late in the week to take stock of the deal. Investors are certain the US and China will stick to the accord – yet China hinted it is in danger. Any nasty surprise may shake confidence and could boost the safe-haven dollar.” 

“Talks between Republicans and Democrats on the next relief package broke down on Friday amid various disagreements. President Trump followed with four executive orders, most notably announcing $400/week in federal unemployment benefits, lower than $600/week previously provided.  It is unclear if these orders can withstand court scrutiny – as the power of the purse belongs to Congress. However, his move was an attempt to break the impasse. Talks are set to resume at some point, with aid to states being one of the most contentious points.”  

“COVID-19 flareups seem to remain small but are less localized than beforehand. On the other hand, the US case curve is now clearly leaning lower, while the pace of new deaths from the disease is also showing tentative signs of dropping. The situation in America remains worse than in Europe, but that gap is narrower – and may weigh on the currency pair.”