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USD Short Covering Presses EUR/USD Back Below $1.2200

EUR
MNI (London)
  • Correction away from Thursday's high of $1.2273 had EUR/USD stepping its way to $1.2226 into Friday's 1600GMT fix but managed to correct to $1.2259 into the weekly close.
  • Brexit trade negotiation stalemate continued, passing the EU 'deadline' at midnight for deal to be ratified by Dec31 and prompted a sharp markdown in GBP. This in turn weighed on EUR/USD, which along with the long awaited fiscal stimulus agreement in the US, saw a sharp move to cover USD shorts.
  • COVID spread in focus as a virulent strain in the UK closes borders.
  • EUR/USD break below $1.2200 provided the lead as USD demand increased across the boar, taking EUR/USD to a low of $1.2179, with recovery efforts capped at $1.2192.
  • The $900bln stimulus package, along with the $1.4tln funding Bill, positive news but expected to apply brakes on the initial USD demand react.
  • US corporate month/year end value USD demand suggested to have had some influence from late last week and could continue into the Christmas break.
  • Support remains around $1.2180, expect more into $1.2150 ahead of $1.2125/20 and $1.2100. Resistance $1.2200, $1.2225/35, $1.2250/60.
  • EU Consumer Confidence at 1500GMT provides domestic data interest.
  • MNI Techs: EURUSD has started the week on a softer note as price pulls back from the recent high of 1.2273 on Dec 17. This is considered a correction with underlying bullish conditions still intact. The daily trend condition however is overbought suggesting scope for a deeper pullback. If correct, this signals scope for weakness towards 1.2088, the 20-day EMA initially. On the upside, 1.2273 is the bull trigger. A break resumes the uptrend.
MNI London Bureau | +44 203-586-2231 | john.webb@marketnews.com
BulletMarketsForeign Exchange Bullets
MNI London Bureau | +44 203-586-2231 | john.webb@marketnews.com
BulletMarketsForeign Exchange Bullets

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