FXStreet reports that economists at MUFG Bank discusses EUR/USD prospects.

“We are more inclined to view the price action as a temporary correction lower rather than the start of a more sustained reversal. It also fits with the usual seasonal pattern for EUR/USD performance. The US dollar tends to underperform in December and then rebounds in January. We expect the pair to begin to consolidate at higher levels in the month ahead.”

“The main trigger for the short-term correction lower for EUR/USD has been a shift in US fiscal policy expectations. The incoming Biden administration is now expected to deliver a bigger stimulus having won a narrow majority in the Senate. The Fed has moved quickly though to dampen expectations for a faster pace of QE tapering in response to looser fiscal policy. The Fed’s commitment to maintain loose policy should prevent a more sustainable rebound for the US dollar at the current juncture.”