EURUSD traded steadily lower yesterday after opening at 1.1148. This was despite better-than-expected data from the euro zone. The currency pair had settled with a 36-pip loss at 1.1112, as Brexit concerns dragged down the euro.
Improving Business Conditions in Germany, Inflation Meets Expectations
Yesterday, the German Ifo Business Climate report for December came in better than expected. It printed at 96.3. It was both higher than the 95.6 forecast and November’s 95.1 reading. This suggests that executives in Germany feel more confident in doing business given the current economic conditions.
Meanwhile, euro zone’s final CPI report for November came as expected at 1.0%. The core reading, which excludes volatile items, was also in line with estimates at 1.3%.
No-Deal Brexit Fears
Remember that earlier this week, Prime Minister Boris Johnson passed a bill to make it illegal for Parliament to extend the transition phase beyond December 2020. This makes market participants worried that the UK would end up with a no-deal Brexit if there is not enough time for negotiations. In response, the EU has warned that they may block Johnson’s proposed deal if issues regarding EU citizens’ rights are not addressed.
The EU and UK economies are deeply intertwined that a no-deal Brexit could adversely affect not just the UK, but also the EU.
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EURUSD Outlook
On the 4-hour time frame, we can see that EURUSD has broken through support at the rising trend line (from connecting the higher lows of November 29, December 6, December 9, December 11, and December 13).
However, it could soon provide EURUSD with resistance because it aligns with the 61.8% Fib level when you draw from the high of December 17 to yesterday’s low. Reversal candles around 1.1150 could mean that the currency pair may soon fall to yesterday’s low or maybe even support at the 100 SMA.
On the other hand, a strong close above 1.1150 may indicate that the currency pair would soon retest its December 13 highs around 1.1200.
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