EUR-Eurozone Firmly In The Grip Of The Pandemic

Dec 21 21, 09:38 GMT

EUR gained on Monday, recovering part of Friday’s losses against the USD and also tended to gain against the JPY. EUR’s fundamentals seem to be heavily linked with the pandemic and its characteristic that Netherlands has entered a new painful Christmas lockdown while other European governments are also contemplating new measures, with Germany deciding today. EU Health Commissioner Stella Kyriakidi has described the situation as particularly critical and that tends to underscore the gravity of the situation. Some analysts have even mentioned that it’s not a question of if but of when stricter measures are to be employed. Overall, the situation could weigh on the EUR as it clouds the economic outlook of the area and could dovishly affect ECB’s monetary policy. As for financial releases we note the release on the consuming side, Germanys’ forward looking GfK Consumer sentiment for January, while in the American session we get Eurozone’s Preliminary Consumer Sentiment for December. Both indicators could adversely affect the EUR as they are expected to drop and could imply an understandingly more pessimistic outlook on behalf of European consumers.

EUR/USD edged a bit higher yesterday testing the 1.1300 (R1) resistance line yet did not break it. We tend to maintain a bias for a sideways movement for the pair currently, given also that the RSI indicator below our 4-hour chart is near the reading of 50. Should the bulls take the initiative over the pairs’ direction we may see it breaking the 1.1300 (R1) resistance line, that prevented the pair’s ascent yesterday and aim for the 1.1370 (R2) level. Should the bears take over, we may see the pair breaking the 1.1225 (S1) support line and aim for the 1.1165 (S2) level.

GBP – Political uncertainty present

The pound seems to have stabilised against the USD yesterday yet gained against the EUR. On the fundamental side the surprise resignation of Brexit minister David Frost, tended to add further uncertainty to the UK Government after the recent scandal broke out as well as due to the Torie rebellion against the UK government’s current Covid policy measures and restrictions. UK health minister Javid refused to rule out even further measures ahead of Christmas, adding to the uncertainty for the UK outlook and discontent of the UK public. Overall, the situation seems to remain fluid in the UK providing little ground for pound traders to stand on fundamentally. As for financial releases we note the release of December’s CBI distributive trades for December.

GBP/USD edged a bit lower yesterday yet remained between the 1.3160 (S1) support line and the 1.3280 (R1) resistance line. We maintain our bias for a rangebound motion for cable between the prementioned levels, and we must note that the RSI indicator below our 4-hour chart is between the readings of 50 and 30 implying a slight advantage for the bears. Should a selling interest actually be displayed by the market we may see cable breaking the 1.3160 (S1) support line and aim for the 1.2990 (S2) level. Should the bulls take over we may see the pair breaking the 1.3280 (R1) line and aim for the 1.3430 (R2) resistance level.

Other highlights for today

Today in the European session we get Germanys’ forward looking GfK consumer sentiment for January and UK’s December CBI distributive trades indicator, while later on we get New Zealand’s milk auctions figures. In the American session we get Canada’s retail sales growth rate for October, and a bit later we note the release of Eurozone’s preliminary consumer confidence for December. Just before the Asian session starts we get from the US the weekly API crude oil inventories figure while later on we note that BoJ is to release the minutes of its October meeting.

EUR/USD H4 Chart