EURUSD: Euro Bulls Shooting For 1.2270

The EURUSD pair logged more solid gains on Wednesday, December 2, up 0.38% against the dollar to close at 1.2113. Upward momentum in the European currency was stoked by Brexit news and a rally in EURGBP. Upside intensified after the release of the ADP private employment report stateside.

After dropping to 1.2040, the price action reversed upward and tested the 1.2100 level by the close. Meanwhile, EURGBP jumped 93 pips to 0.9084 amid Brexit news. This was a big move for a cross currency.

The EU’s chief Brexit negotiator Michel Barnier was quoted as saying that “a deal still hangs in the balance”. That was enough to crash the pound. Given that the reaction to news is always the same, it can be assumed that sharp fluctuations are caused by FX trading robots (bots) that are geared towards volatility. Thus, if volatility rises by X% in X seconds, the bots start buying/selling in the direction of the incipient momentum. Then at a certain point, they exit (close) positions so as not to incur losses when the correction sets in.

According to yesterday’s ADP report, the US economy added 307,000 jobs in November, falling short of the +500,000 consensus forecast.  The October reading was revised upward from 360,000 to 404,000. Needless to say, the reading was tepid.

Today’s macro agenda (GMT+3)

EU: Eurozone countries will release services PMIs (November) at: 11:5o in France, 11:55 in Germany, and 12:30 in the UK

16:00 EU: retail trade (October)

16:30 US: initial jobless claims (November)

17:45 US: services PMI (November), 18:00 ISM non-manufacturing business activity (November)


Current outlook

Brexit negotiators are keeping traders on pins and needles with their uncertainty. Nobody knows what news will roll in. What’s more, France reminded Barnier of the risk of a veto should he yield to the UK’s demands in the post-Brexit trade talks.

At the time of writing, the euro was trading at 1.2119, with cable topping the leaderboard, having pared 76% of yesterday's losses and the price action is currently retracing to the upper line of the 1.3400-1.3452 range. It is recovering quickly on the back of a weaker EURGBP cross.

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Disclaimer: Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial ...

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