Charles Michel, the President of the European Council, supposes that the first vaccines against COVID-19 will be approved in the European Union in the upcoming weeks. However, despite this positive news, Germany continues imposing strict lockdown measures.

The German authorities have decided to tighten containment measures because of the worsening epidemiological situation. From December 16 to January 10, all hairdressers and retail stores will be closed whereas schools and kindergartens will go on vacation. Grocery stores, pharmacies, household chemicals, dry goods stores, gas stations, banks, and post offices will remain open.

During the Christmas holidays from December 24-26, only small family gatherings are allowed. The limit is 9 people. On New Year's Eve, December 31 and January 1, a ban on mass events will be introduced. Citizens are strongly advised to refuse to launch fireworks. Drinking alcohol in public places will be prohibited. Moreover, citizens of the country are recommended to refrain from any non-essential travel.

This intention to restore control over the virus by means of tough containment measures may lead to a further slowdown in the economic growth. This, in turn, may influence the euro.

On Friday, the euro/dollar pair made an attempt to return to the area of 1.2160/1.2177. However, sellers managed to push the price down by just 50 pips. At the same time, the pound/dollar pair dropped by 180 pips. That is why the decline in the euro/dollar pair is considered as the market stagnation.

The euro has been overbought for a long time already. However, sellers do show confidence.

On December 11, the market dynamics was just 57 pips that is 23% lower than the average level.

On the daily trading chart, we can see a mid-term uptrend. The pair reached the levels logged in 2018.

Today, the eurozone has revealed its industrial production data. According to the forecast, the indicator should have dropped by 4.4% compared to a slump of 6.8% in the previous period. However, the data beat the forecast. The indicator slid just by 3.8%. However, the market ignored the figures.

Analyzing the trading chart, we can see that the week has begun with the price gap. The euro has recouped its Friday losses. The jump was caused by the progress in the UK-EU negotiations. The UK is ready to make a concession on the level playing field rules. Against this background the pound sterling soared by 215 pips. At the same time, the single currency is trying to accelerate its upward movement.

If the price consolidates above 1.2180, it may reach the level of 1.2250.

According to the alternative scenario, the pair may slow down between the levels of 1.2160/1.2170. However, later, the price may decline to 1.2100 as it occurred earlier.

Indicator analysis

Analyzing various time frames, we can see buy signals on the one-minute, one-hour, and daily charts.

Volatility for the week/Measurement of volatility: month, quarter, year

The volatility measurement reflects the average daily fluctuation calculated for a month/quarter/year.

At the moment, dynamics is 61 pips that is 17% below the average level. However, acceleration is still possible amid high speculative activity.

Key levels

Resistance levels: 1.2180*; 1.2450**; 1.2550; 1.2825.

Support levels: 1.2000***; 1.1890-1.1900-1.1920**; 1.1810*; 1.1700.

* Periodic level

** Range level

***Psychological level