Investors are afraid to miss the Christmas rally, the S&P 500 continues to update record highs and pulls up the main currency pair. On the second attempt, the psychologically important level of 1.2 succumbed to the bulls of EUR/USD, after which there was no stopping the buyers. Ahead of the US labor market data for November, the euro soared to the top of the 21st figure against the US dollar, where it was last seen in April 2018. Neither a significant downturn in business activity nor a double-dip recession knocking on the door of the eurozone can stop it. And in my opinion, neither the ECB can do this.

Given that almost 9 out of 10 conversion operations on Forex are associated with the US dollar, it is evident that the main driver of changes in EUR/USD quotes are events occurring in the United States. In this regard, the reduction in political uncertainty after Joe Biden's election victory on November 3 and the rally in the US stock indexes, impressed by the good news about vaccines from COVID-19, have become much more significant arguments for investors than Brexit, the reluctance of Poland and Hungary to support the idea of an EU rescue fund for €750 billion, or the intention of the European Central Bank to expand the emergency asset purchase program at the meeting on December 10. Yes, the meeting of Christine Lagarde and her colleagues from the Governing Council will be the key event of the week, but without a correction, the S&P 500 EURUSD is unlikely to be worthy of a pullback.

At the beginning of winter, the bulls in US stocks are drawing strength from reports of the resumption of negotiations in Congress on additional fiscal stimulus. The $900 billion support package proposal draws favor among both Democrats and Republicans, and Joe Biden sees it as the beginning of a larger-scale action. If so, then the return of the idea of a reflationary environment is quite logical. At the same time, a number of market indicators, including the ratio of copper and gold, signal that consumer prices really intend to accelerate. The yield on US Treasury bonds is stagnant due to concerns about the start of the twist program. As a result, real rates are falling, the attractiveness of US assets is declining, and the dollar continues to slide into the abyss.

Dynamics of the ratio of copper to gold and the yield on US bonds:

Money, like fish, is sought where it is deeper. And in 2021, this place is clearly not the United States. Vaccination and the associated rapid growth of the global economy allow investors to look for alternatives to American securities outside the US. Nowadays, the most popular are the assets of developing countries, which have been growing for several weeks in a row, Asia, led by China, and Australia, and New Zealand, which are closely linked to China. Next year it will be Europe's turn. Therefore, the EUR/USD rally looks unsurprising.

Technically, the Double bottom pattern signals that the upward movement in the euro may continue to $1.225 in the short term. Therefore, I recommend holding and increasing long positions on EUR/USD formed on the breakout of the resistance at 1.195 and 1.196.

EURUSD daily chart: