FOREX-Euro heading for the heavens as dollar enters purgatory

* Euro sits by more than 2.5 year peak as U.S. dollar sinks
* GBP hits 1 year top, Brexit negotiations eyed; other
majors firm
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SYDNEY, Dec 4 (Reuters) - The euro was headed for its best
week in a month on Friday and has blown past major resistance
levels as investors piled into bets the U.S. dollar has further
to fall as the world begins to emerge from the COVID-19
pandemic.
The common currency EUR= is up 1.5% for the week so far
and last sat comfortably at $1.2140. Having finally breached
$1.2000 after multiple attempts, momentum funds have surged in
to long positions. The next serious chart resistance level is
not until $1.2555.
The euro is also set for its best week against the Japanese
yen EURJPY= in six months, even though the yen rose a little
against a broadly weaker dollar overnight. Sterling GBP=
touched a one-year high and the yen JPY= hit a two-week top.
"The euro is holding above the $1.21 level for the first
time since spring 2018, despite the fact that there is only a
week to go before the European Central Bank is expected to add
more policy stimulus," said Rabobank strategist Jane Foley.
"There is no doubt that the actions of the Federal Reserve
have been hugely successful at weakening the value of the dollar
since the spring this year."
Investors have turned heavily short dollars in recent
months, figuring rates will stay low for a long time in the
United States forcing yield-seekers to head elsewhere for better
returns. 0#NETUSDFX=
Against a basket of currencies =USD the dollar has shed
about 12% from a three-year high of 102.990 in March, to hit a
two-and-a-half year low of 90.504 on Thursday.
The Australian dollar AUD=D3 struck a 28-month high of
$0.7449 overnight and is up nearly 0.8% for the week so far.
The New Zealand dollar NZD=D3 made a fresh 31-month high
overnight and is set for its fifth consecutive weekly gain, a
streak which has put it 8.6% above late-September lows.
"Call it December seasonality come early, call it what you
will, but the market's appetite for the kiwi is insatiable at
the moment," ANZ Bank's chief economist Sharon Zollner and
strategist David Croy said in a note on Friday.
"And while the rubber bands of momentum and valuation are
starting to get stretched, technically it looks very solid;
commodity prices are rising; and nobody wants to own dollars ...
a break of 0.7160 would be extremely bullish."
Even worries about painful winter of deaths and lockdowns in
the United States has failed to drive too much safe-haven demand
for dollars, as investors reckon on more government support -
either in the form monetary easing or fiscal spending.
A $908 billion aid plan gained momentum in Congress on
Thursday as conservative lawmakers expressed their support and
the Federal Reserve meets later in the month amid speculation it
could expand its bond-buying programme. Both are viewed as negatives for the dollar since bond
buying would keep yields anchored, and spending could support a
bullish mood and the buying of riskier currencies.
Investors are looking to U.S. jobs figures due later on
Friday for the latest signs of the recovery losing momentum,
while the fate of the pound is largely in the lap of Brexit
trade deal negotiators who remain locked in talks. "Traders need to assess their sterling exposures into the
weekend," said Chris Weston, head of research at Melbourne
brokerage Pepperstone.
"If I were running long exposures, I wouldn't be adding ...
but questioning, if we see a deal, how punchy the gapping risk
will be," he said. "If we don't get a deal and the rhetoric from
(EU negotiator Michel) Barnier or the British camp shows limited
progress then we could see GBPUSD gap lower on Monday."