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EURUSD: market sees heightened volatility ahead of Christmas

The EURUSD pair posted a decline on Tuesday, December 22, down 0.65% to 1.2161. During the European session, the price rose to 1.2257, from which it fell to 1.2152 (-105 pips).

Yesterday the market was impacted by Brexit news. First, rumors circulated that Britain and the EU were close to striking a Brexit deal, although the process had not yet been completed. Then media reports came out that the EU had rejected the British proposal. Michel Barnier, the EU's chief negotiator, confirmed that no agreement had been reached on fisheries. Whether or not the UK will still manage to reach an agreement with the EU remains unknown.

Meanwhile, the US Congress passed an $892 bln Covid-19 relief bill that aims to strengthen the country's response to the pandemic and support the stricken economy. Trump refused to sign off on the bill and demanded a revision. He asked Congress to raise the $600 check to $2,000 or $4,000 for spouses, and eliminate all unnecessary spending items.

Todays macro agenda (GMT+3)

12:00 Switzerland: ZEW and Credit Suisse investor expectations (December)

16:30 Canada: GDP (October); US: personal income and spending (November)

17:00 Switzerland:  SNB quarterly inflatio0n report; US: house price index (October)

18:00 US: new home sales (November); Michigan consumer sentiment (December)

18:30 US: EIA weekly petroleum status report

21:00 US: Baker Hughes weekly oil rig count


Current outlook

This morning, the pair is off an intraday low of 1.2152 and has recovered to 1.2194. Major currencies are all trading in positive territory. Topping the leaderboard are the British pound (+0.61%), the Australian dollar (+0.57%) and the New Zealand dollar (+0.38%). Appreciation of AUD and NZD points to heightened risk appetite. Market participants, apparently, are back to believing in a post-Brexit deal.

Cable is moving higher against all currencies, pushing up other pairs along with it. The euro bulls will encounter resistance at 1.2203-1.2207. In case of a breakout, the price action will step up to 1.2250, with support at 1.2130.

December 24 is a holiday stateside, with trading floors running on a reduced schedule. The FX market will be closed in observance of Christmas Day on Friday. Anything can be expected amid a thin market and the lack of clarity on Brexit.


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