Evening review of EURUSD 12/24. Significant news almost ignored: EU and UK agree to deal

Trading 24 Déc 2020 Commentaire »

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EURUSD - no change.

Important: There is an agreement between the EU and Britain. If this deal had not been concluded - then from January 1, all tariffs and duties would fall on business from both sides. Nevertheless: a) the deal was concluded; b) there is no market reaction.

Everyone's gone for Christmas! Here's the answer.

We keep buying euros from 1.2190 and below.

We turn down from 1.2130.

The material has been provided by InstaForex Company - www.instaforex.com

GBP/USD. « We bought on rumors, now we sell on facts »: pound temporarily retreats

Trading 24 Déc 2020 Commentaire »

"Buy on rumors, sell on facts" - this trading principle is now actively implemented by traders of the pound-dollar pair. The British pound was actively strengthening throughout the market during the day, reacting to optimistic rumors about the prospects for a trade deal. Yesterday morning, traders recorded a price low at around 1.3350, while today the pair jumped to 1.3618. The nearly 300-point growth was driven solely by Brexit. The news was contradictory, but traders staked on a positive outcome of the negotiations. And they did not lose: on the eve of the Christmas weekend, the parties nevertheless reached a compromise solution and "shook hands." But the pound fell under a wave of selloff as soon as the agreement was officially announced.

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The reasons for this behavior are quite banal: market participants in large numbers began to take profits on the GBP/USD pair, leaving long positions. Ahead the long weekend, which will last until Tuesday. Then a small "break" and again the holidays, this time New Year's. On the eve of the festive time, traders do not risk leaving open orders, especially when the price is at such high values.

On the other hand, this does not mean that the market has won back the Brexit deal. It's just that the politicians came to a compromise at the most inopportune moment, from the foreign exchange market's perspective: in the pre-new year period, traders are forced to trade in conditions of low liquidity and, roughly speaking, are not able to adequately respond to the ongoing processes. At the same time, it is worth recognizing that today there was an event that would have an impact on the pound not only in the medium term, but also in the long term. The achievement of the fortieth figures can now be discussed not only in a hypothetical context – this price horizon will serve as a kind of beacon for GBP/USD buyers in 2021. But it will be possible to consider the pound's growth prospects in a practical plane after New Year's, as in the near future we will increasingly face abnormal price movements. Traders and market makers, as a rule, close both the month and the year in the final week, so the New Year's eve price celebrations have already become a kind of tradition.

Now a few words about the deal itself. According to the Reuters news agency, the British made significant concessions over the last day of negotiations – including on the distribution of quotas for fishing in the UK's exclusive economic zone. It is noteworthy that such a scenario was voiced by insiders of the Financial Times publication last week. Then journalists warned that the deal will be concluded at the last moment, and actually on the terms of the Europeans. London was not really going to lose the single market, as the affected party would eventually be Britain, not the European Union. At least for the reason that the UK sends more than 40% of its exports to the EU countries, while the key countries of the bloc send only 5-6% of their exports to the British.

It is worth noting that the details of the agreement have not yet been made public. Prime Minister Boris Johnson only noted that the deal will provide the country with a trade turnover of 660 billion pounds a year, protect jobs and allow exporting products without tariffs and quotas. Also, according to him, London has ensured that the European Court will not be able to resolve disputes that may arise between London and Brussels in the future. In turn, the chief negotiator from the EU Michel Barnier said that the UK and the European Union maintain a visa-free regime and "full access to each other's territory and maritime space." However, the deal does not include general positions on foreign policy, but allows for synchronization of sanctions.

They also announced that the parties agreed to create a Joint Partnership Council, which will monitor compliance with the deal and facilitate discussion of controversial issues. We do not know how this Council will be formed and what leverage it will have.

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It is obvious that all information gaps will be filled in the very near future, as the parties have yet to ratify the approved deal. The British Parliament will meet for an emergency session on December 30. But the European Parliament will not have time to consider this issue this year, so the parties agreed to apply a special legal mechanism, thanks to which the deal will be de facto effective from January 1, even without ratification by the European Parliament.

It is better not to open any trading deals on the GBP/USD pair right now: the thin market can present unpleasant surprises. But in general, long positions remain a priority in the medium term (not to mention the long term). The first target is this year's high at 1.3624. The main target is located slightly higher - the upper line of the Bollinger Bands indicator on the monthly chart, which corresponds to 1.3680. Overcoming this resistance level will open the way to the 37th figure area.

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Treasury Reveals Details Of 2-Year, 5-Year And 7-Year Note Auctions

Trading 24 Déc 2020 Commentaire »

The Treasury Department on Thursday announced the details of this month's auctions of two-year, five-year and seven-year notes.

The Treasury revealed it plans to sell $58 billion worth of two-year notes and $59 billion worth of both five-year notes and seven-year notes.

The results of the two-year and five-year note auctions will be announced next Monday, while the results of the seven-year note auction will be announced next Tuesday.

Last month, the Treasury sold $56 billion worth of two-year notes, $57 billion worth of five-year notes and $56 billion worth of seven-year notes.

The two-year note auction attracted above average demand, but the five-year and seven-year note auctions attracted below average demand.


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Swiss Franc Weakens On Brexit Deal Expectations

Trading 24 Déc 2020 Commentaire »

The Swiss franc depreciated against its major rivals in the European session on Thursday, as investor sentiment lifted up following reports that Britain and the European Union were on the brink of striking a trade agreement after a compromise on fishing rights.

Officials are finalizing the details of a deal in Brussels, with an announcement due today.

Irish foreign minister Simon Coveney told RTE Radio that there was "some sort of last-minute hitch" as both sides finalize the text of the agreement on fishing rights.

The two sides have agreed to a new five-and-a-half year transition period on fishing rights, which will cut the EU's fishing quota by a quarter.

A deal would end the likelihood of the two sides imposing border checks and import taxes on each other's goods from next year.

The franc weakened to 0.8905 versus the greenback, from a high of 0.8869 hit at 9:30 pm ET. If the currency falls further, 0.92 is likely seen as its next possible support level.

The franc reversed from an early high of 1.0816 versus the euro, with the pair trading at 1.0856. On the downside, 1.10 is possibly seen as its next support level.

The franc edged down to 116.37 versus the yen, after rising to a 2-day high of 116.78 at 7:45 pm ET. The currency is poised to face support around the 119.00 region.

Data from the Bank of Japan showed that Japan's services producer prices declined for the second straight month in November.

The services producer price index dropped 0.6 percent annually, following a 0.5 percent decrease a month ago.

The Swiss currency dropped to more than a 3-week low of 1.2101 against the pound from yesterday's closing value of 1.1979. The currency is likely to target support around the 1.24 level.


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*Canadian Building Permits Spike 12.9% In November

Trading 24 Déc 2020 Commentaire »

Canadian Building Permits Spike 12.9% In November


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Turkish Lira At Near 5-week High Versus U.S. Dollar After Turkey Decision

Trading 24 Déc 2020 Commentaire »

The Turkish Lira moved up against the U.S. dollar in the European session on Thursday, after Turkey's central bank raised its key rate sharply for the second straight meeting to lower inflation.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey governed by Naci Agbal decided to lift the key one-week repo rate sharply to 17.00 percent from 15.00 percent.

The bank had raised the rate by 475 basis points at the first MPC meeting of Agbal as governor in November.

The Lira reached as high as 7.52 against the greenback, its biggest level since November 20. The pair had ended Wednesday's deals at 7.63. The next possible resistance for the Lira is seen around the 7.0 level.


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Short-term view for NZDUSD remains bearish

Trading 24 Déc 2020 Commentaire »

NZDUSD is trading at 0.71 and our expectations remain bearish. We continue to expect a move lower towards 0.69 and the 38% Fibonacci retracement. Price is vulnerable to a move lower and this is portrayed by the bearish RSI divergence.

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Red lines - bearish divergence

Blue line -expected path

Black lines -Fibonacci retracement levels

We believe it is most probable to have seen a short-term top at least at recent highs of 0.7168. Short-term support is at 0.7025-0.70 area. Breaking below this level will increase pressure on NZDUSD and eventually push price lower towards 0.69 which is our first target area for a pull back, The RSI bearish divergence is just a warning sign and not a reversal sign. However at current levels we prefer to at least be neutral if not bearish.

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Gold price forms bearish channel.

Trading 24 Déc 2020 Commentaire »

Gold price got recently rejected at $1,900. Price is still forming higher highs and higher lows if we see the price action from recent lows at $1,763. If we look price action from the all time highs back in August, price is making lower lows and lower highs. Price has recently made a rejection at the upper channel boundary.

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Blue lines - bearish channel

Gold price is trading near $1,880. Price is close to key channel resistance. Bulls need to be very cautious. Support is at $1,850 and next to $1,800. Breaking below each level will push price towards the next. If bulls are unable to hold price at $1,800 we should then expect a move below $1,763 low. Next target could be at $1,714. Resistance is found at $1,900. Recapturing it is key for bulls. Inability to do so will be a sign of weakness,

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Turkey's Central Bank Lifts Rate Sharply By 200 Bps

Trading 24 Déc 2020 Commentaire »

Turkey's central bank resorted to another sharp rate hike on Thursday, in a bid to bring inflation down from double-digits and maintain price stability.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey governed by Naci Agbal decided to lift the key one-week repo rate sharply to 17.00 percent from 15.00 percent.

The bank had raised the rate by 475 basis points at the first MPC meeting of Agbal as governor in November.

Early November, President Recep Tayyip Erdogan replaced TCMB Governor Murat Uysal with former finance minister Agbal after the Turkish lira fell to a record low this year.

"In the forthcoming period, tightness of monetary policy stance will be decisively sustained until strong indicators point to a permanent fall in inflation in line with the targets and to price stability, the bank said in a statement.

The committee said domestic demand conditions, the exchange rate effects, rising global food and other commodity prices and the weakness in inflation expectations continue to affect the pricing behavior and inflation outlook adversely.

In November, inflation rose to a 15-month high of 14.0 percent from 11.9 percent in October.

After taking into account the end-2021 forecast target, the MPC decided to implement a strong monetary tightening, in order to eliminate risks to the inflation outlook, contain inflation expectations and restore the disinflation process as soon as possible.

Today's meeting will provide further reassurance to investors that the shift to orthodoxy is here to stay, Jason Tuvey, an economist at Capital Economics, said.

The CBRT has probably now done enough and the one-week repo rate is expected to be kept at 17.00 percent for at least the next six months or so, the economist added.


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Ichimoku cloud indicator Daily analysis of EURUSD

Trading 24 Déc 2020 Commentaire »

EURUSD is under pressure again. Price could not remain above the tenkan-sen for a second day and 1.22 has been lost. This weakness is a short-term worrying sign, that implies a move lower is imminent.

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EURUSD is trading below the tenkan-sen (red line indicator) for the second day. Support is at yesterday's lows at 1.2153 and if this level is broken, we should expect price to move lower towards the kijun-sen (yellow line indicator) at 1.2035. Short-term trend is vulnerable to a move lower. Bulls in order to avoid this should support price and push it above the short-term resistance and recent high at 1.2255.The material has been provided by InstaForex Company - www.instaforex.com