The EURUSD pair closed in decline on Monday, December 7, down 0.13% against the dollar to 1.2106. High market volatility was seen during the European session on the heels of Brexit news. The pound shed nearly 2% and dragged other currencies down with it.
Bloomberg wrote, citing a senior British official, that the UK could pull out of discussions on Monday if the parties fail to make progress. PM Boris Johnson also announced that he is ready to pursue a no-deal unless the EU backs down.
It was somewhat surprising that after a sharp downturn, cable pared 85% of its losses, while the euro retraced to its intraday high. Volatility subsided during the North American session, and the dynamics of major currencies was driven by cross pairs.
Today’ s macro agenda (GMT 3)
13:00 Germany and Eurozone: ZEW economic sentiment index; Eurozone: GDP growth rate and employment change (Q3)
16:30 US: non-farm productivity and unit labor costs (Q3)
Major currencies have been showing mixed performance in Asian trading. The pound and franc are trading in the red, while all others are in positive territory. The pound sterling has logged modest losses thus far (-0.9%).
The EU and the UK issued a joint statement asking negotiators to prepare an overview of the remaining differences to be discussed in a face-to-face meeting in Brussels in the coming days. PM Johnson will travel to Brussels to meet with Ursula von der Leyen. Earlier, he said that he is ready to withdraw from the Brexit talks if the EU does not agree to yield to his demands. Therefore, he could cancel the trip at any time. Time is running out amid growing fears of a no-deal Brexit.
Near the opening of the Asian trading session, Senate Majority Leader Mitch McConnell gave an encouraging signal about a new aid package. This is mildly positive news for risk assets. EURUSD rose to 1.2123 and is currently hovering at 1.2111.
FX players are buying the euro in crosses, so they will support the euro against the dollar. The daily candlestick has a bearish body with large shadows. Market participants now need to break out of the 1.2079-1.2166 range.
As long as crosses are on the rise, there is a chance for EURUSD to reach the range of 1.2130-1.2135. If the price action holds back buyers, then we should expect selling to resume and the pair to fall back to 1.2070. Above that point, resistance is at 1.2157 (the trendline drawn at the tops of 1.2178 and 1.2166).
Given that today’s economic calendar is empty, unless Brexit news comes in the EURUSD pair will continue to trend sideways near the balance line, which currently passes through 1.2130.