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EURUSD: risk of correction shaping up

The EURUSD pair rose 0.57% to 1.2266 Thursday, December 17. The single currency drew support from euro crosses right up until the close. Demand for risk assets remained high amid expectations that a post-Brexit trade deal could be signed before long, as well as the approval of a new $908 bln coronavirus relief bill for US businesses and households.

The GBPUSD pair fell 83 pips ahead of the close of the North American session. Meanwhile, Brexit brinkmanship continued. EU Brexit negotiator Michel Barnier welcomed substantial progress on many issues, but warned that the discussions are in a “serious situation” and a no-deal scenario was very likely unless the EU changed its position substantially, particularly on fishing rights. It now looks as though the talks will spill over to the weekend again.  Pound sterling came under increasing pressure in Asian trading.

Todays macro agenda (GMT+3)

12:00 Eurozone: current account (October); Germany: Ifo business climate, Ifo expectations, and Ifo current conditions (December)

13:00 Eurozone: PPI (November)

15:00 UK: BoE quarterly report

16:30 US: current account (Q3); Canada: retail sales (October)

18:00 Eurozone: consumer confidence (December); US: leading index (November)

21:00 US: Baker Hughes oil rig count

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Current outlook

Major currencies have been trading in negative territory during today’s Asian trading. The Japanese yen topped the loserboard. The single currency fell back to 1.2239, while sterling retreated to the balance line of 1.3520.

EUR and GBP opened higher in Europe, but it’s hard to say which way prices will move after the opening in London and then in the North American session before the weekend. Moreover, players should note that heightened volatility could come from today’s quadruple witching stateside.

Market participants continue to focus on Brexit and the stimulus talks between Republicans and Democrats. I would advise investors to stay focused on the dynamics of US stock indices. A delay in the bailout package ahead of the weekend could exert a negative impact on US stocks. In this case, the dollar would garner support as a defensive asset.

Meanwhile, today’s economic calendar shows a dearth of key events. In the absence of Brexit developments, we expect selling in the euro to resume at 1.2265 with a target of 1.2220.

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