On Monday the 4th of December, trading on the euro/dollar pair closed down. The euro and the pound spent the day under the influence of political factors. Volatility was high on pairs including the pound.
After dropping during the morning hours, the pound surged 100 pips against the dollar after reports of a breakthrough in Brexit negotiations concerning the UK’s terms of exit from the EU. Accordingly, the euro came under pressure from this against the dollar via the euro/pound cross.
The pound then shed 120 pips against the dollar following a statement from European Commission President Jean-Claude Juncker. He said that they hadn’t managed to reach a final agreement with the UK and that they would try to address all issues in time for the EU leaders’ summit in mid-December. After this speech, the euro recovered from a low of 1.1829 to reach 1.1870 during today’s Asian session.
Day’s news (GMT+3):
Fig 1. EURUSD hourly chart. Source: TradingView
Yesterday’s predictions came off in full. The euro dropped from the trend line and has now returned to the balance line (sma 55). This didn’t work out perfectly due to the volatility caused by political factors.
In Asia, the dollar is trading up against the pound (+0.07%) and the yen (+0.20%). On the crosses, the euro is trading down against the loonie (-0.01%) and Aussie (-0.64%). The main cross, the euro/pound, has appreciated by 0.13% to 0.8812. The price has broken out of the A-A channel. Sellers made it to the trend line, but prices closed above it, meaning the breakout wasn’t confirmed.
Considering the factors mentioned above, my forecast for Tuesday has the euro rising against the dollar to 1.1911/27. A breakout of 1.1940 will cancel the triangle formation and open the way towards 1.2090. This scenario won’t play out if the hourly candlestick closes below 1.1835.
Remember that the dollar is currently being propped up by the US Senate’s approval of the tax reform bill as well as the upcoming FOMC meeting.