EUR/USD Is Looking Perky, Breakout Coming?

  • EUR/USD is trading higher despite a risk-off atmosphere.
  • Calm around Germany and France countertrade and Brexit.
  • The technical picture is turning positive for the pair.

EUR/USD kicks off the new week on the upside, trading at the highest levels since November 20th. The US Dollar is on the back foot as the benchmark 10-year Treasury yield is on the back foot, down to 2.85%.

The US Non-Farm Payrolls slightly missed expectations on Friday with 155K jobs gained and Average Hourly Earnings rising by only 0.2% MoM. The news slightly dents the chances of multiple rate hikes in 2019.

Tensions between the US and China continue as Huawei’s CFO Meng remains in custody in Canada, upon a US court’s request. US Trade Representative Robert Lighthizer claims the legal proceedings have nothing to do with trade talks, but China has a different perspective. The situation weighs on markets.

As recently as last week, the greenback gained when stocks dropped. The advance of EUR/USD despite the news implies a potential decoupling of a stronger USD with falling stocks. Are Fed expectations setting the tone instead of trade?

This is a bullish sign for the pair.

Back in the old continent, Germany’s ruling CDU party elected Annegret Kramp Karrenbauer as party leader. She is called “mini-Merkel.” Apart from being an ally of Chancellor Angela Merkel, she is considered as a status quo candidate, providing stability for the euro zone’s largest economy.

Stability is also seen in the second-largest economy. French President Emmanuel Macron is set to offer further concessions to the “gilets jaunes” (yellow vests) protestors. Italy, the third-largest economy, continues negotiating with the European Commission on the budget.

Brexit continues having an impact on the common currency. The European Court of Justice ruled that the UK can unilaterally revoke Article 50, thus reversing Brexit, accepting the opinion of its General Advocate. The UK Parliament is set to reject the Brexit deal on Tuesday, and options from a no-deal Brexit to no-Brexit will become available. Uncertainty is high.

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