Euro has gained strength against dollar in a single-day percentage gain in nearly nine months. The Euro’s rise is remarkable, given it is happening just days before the European Central Bank’s Dec. 10 meeting, where policymakers are expected to announce additional monetary easing measures.

The bearish sentiment around the dollar looks to be powering gains in the Euro. The dollar is on the defensive and could continue to lose ground ahead of Christmas on hopes for a swift global economic recovery on the back of potential coronavirus vaccines.

Markets are also betting on easing of the US-China tensions under the US President-elect Joe Biden’s leadership. According to The New York Times, Biden has called on Congress to pass a substantial relief package to help keep businesses, households, and local governments afloat.  That has revived hopes for additional fiscal stimulus, adding to bearish pressures around the dollar.

Stronger than expected data also lent support to the euro. Germany reported a surprise drop in unemployment rolls that helped ease the unemployment rate. Manufacturing PMI for the Eurozone was revised higher, offsetting the sting of lower inflation.

Last month’s aggressive lockdowns in Europe are finally bearing fruit as there are signs that Europe’s COVID-19 outbreak is slowing. New virus cases in France fell to 4,005 on Monday from a peak above 86,000 in early November. Virus cases in Spain are just above 10,000, down from more than 25,000 on Oct. 30. In Italy, there were 16,370 new cases yesterday compared with 40,902 on Nov. 13. The numbers are better in Germany as well, but more volatile. The U.S., on the other hand, is bracing for the worst as test results from Thanksgiving gatherings start to come in.

The Dollar Index is still trading near 2.5-year lows. Concerns about a spike in coronavirus cases after Thanksgiving and Federal Reserve Chairman Jerome Powell’s promise to keep interest rates low until there are actual signs of inflation give investors very little reason to buy U.S. dollars.

EUR/USD 4 Hour Chart:

Support: 1.1971 (S1), 1.1871 (S2), 1.1819 (S3).

Resistance: 1.2123 (R1), 1.2175 (R2), 1.2275 (R3).

Strong Eurozone data and dollar weakness makes Euro stronger than greenback. We expect a bullish trend for EUR/USD.