EURUSD had a topsy-turvy end to last week’s trading. On Friday, the currency pair rallied around 80 pips to a four-month high at 1.1197. However, euro bulls were not able to sustain their gains. The currency pair soon after fell and settled at 1.1114, just 1 pip above its opening price.
UK General Elections 2019 Sparked Rally on the Euro
The initial rally on the euro was sparked by polls which showed that the Conservatives would walk away with majority seats in parliament. Results throughout the day later on confirmed what the polls predicted. Prime Minister Boris Johnson and the Tories defeated the Labour Party in a landslide victory. This was bullish for the euro because the uncertainties brought about by Brexit has been looming over the markets for the past few years. The expectation now is for a Brexit plan to be announced soon.
The US Has a Phase One Deal With China
However, the US dollar gained ground during the New York session as American policymakers announced that a phase one deal was done. US Trade Representative Robert Lighthizer said that while there were still some “scrubs”, an agreement is “totally done, absolutely.”
This means that some of the existing tariffs on Chinese goods will be rolled back. The levies that were initially set to take effect last SUnday have also been cancelled. All of these would be in exchange for China buying at least 200 billion dollars-worth of agricultural, manufactured, and energy products until 2021.
We have, however, not yet heard from China any confirmation that a trade deal has been signed. This means that risk aversion may dominate market sentiment if investors hear contradicting statements from the two countries.
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Euro Zone and US PMIs Due Today
For today, a handful of top-tier data are due from the euro zone.
We kick things off at 8:15 am GMT with the French services PMI for November which is eyed at 52.1 and its manufacturing PMI has a 51.5 forecast. This will then be followed by Germany’s data at 8:30 am GMT. The country’s services PMI is anticipated at 51.2 while its manufacturing PMI is seen at 44.6. Then at 9:00 am GMT, the euro zone-wide services PMI has a 52.0 estimate while its manufacturing PMI is eyed at 47.3.
Later on in the day, the US version of the reports will be due. At 2:45 pm GMT, the services PMI is estimated at 52.0 while the manufacturing PMI is expected at 52.6.
Numbers above the 50.0 are seen to indicate expanding economic conditions. Better-than-expected numbers will likely have a bullish effect on their corresponding currency because they could indicate resilience in their economies.
EURUSD Outlook
On the hourly chart, we can see that EURUSD has been on an uptrend as evidenced by the rising trend line that you get from connecting the lows of November 29, December 9, and December 11. As of this writing, it looks like the currency pair still has some room to move lower. The area around 1.1105 coincides nicely with the 100 SMA and 200 SMA, the trend line, and previous highs. If support around this level does not hold, we could see the currency pair trade lower to its December lows at 1.1045.
On the other hand, if there are enough buyers in today’s trading, we could see EURUSD make a run for last week’s highs. The 1.1200 psychological handle will be the level to watch out for resistance.
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