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- The EUR/USD pair has reached an overbought zone on the daily chart.
- The biggest recent catalyst has been Brexit, where differences between the two sides have continued.
- Traders are also focusing on the upcoming interest rate decision by the European Central Bank (ECB)
The EUR/USD is little changed as the market waits for the outcome of Brexit talks between Boris Johnson and European leaders. It is also reacting to the GDP data released yesterday ahead of the European Central Bank (ECB) decision.
Brexit talks eyed
Brexit has been the main catalyst for the EUR/USD pair in the past few days. That’s after the ongoing differences between the European Union (EU) and the United Kingdom (UK) escalated this week.
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Therefore, focus will be on Boris Johnson, who will hold a meeting with EU leaders, including Ursula von der Leyen later today. This meeting will be the last-ditch effort to have a deal and ensure that the two sides have an amicable relationship starting in January. Failure to reach an agreement in today’s meeting will push the potential of a no-deal Brexit to a high.
In a sign of good will, Boris Johnson announced that he would scrap the problematic parts from his Internal Market Bill yesterday.
There are three main outstanding issues on Brexit. There are concerns about fisheries, where the UK wants to have a limit on foreigners who have access to its waters. There are also issues about fair-trading practices or business regulations and government support. Finally, there are disagreements on how to enforce a deal.
The UK would be hurt more if it leaves without a deal. The EU wouldn’t be spared either since it sells goods worth more than £374 billion to the country.
ECB decision eyed
EUR/USD forex traders are also eying the upcoming European Central Bank (ECB) interest rate decision. Economists polled by Reuters believe that the ECB will leave interest rates unchanged as it has guided before.
The key issue to watch will be about the ECB’s quantitative easing program. Economists believe that the bank will boost its 1.35 trillion-euro quantitative easing by between 400 and 600 billion euros. They say that this is necessary for the bank to continue supporting the recovery.
The decision will come a day after the Eurostat released the EU’s GDP data. The numbers showed that the European economy rose by 12.5% in the third-quarter after crashing by 11.8% in Q2. On an annualised basis, the economy weakened by 4.3%.
EUR/USD technical outlook
The EUR/USD is trading at 1.2118, which is a few pips below this year’s high of 1.2170. The pair has jumped by more than 14% from its YTD low. The daily chart also shows that the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and the stochastics oscillator are all in the overbought zone. This means that the pair could experience a reversal in the near term. If this happens, the level to watch will be 1.2000.
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