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Euro Outlook: EUR/USD Hitting Resistance, EUR/GBP Upside Faded

Euro Outlook: EUR/USD Hitting Resistance, EUR/GBP Upside Faded

Justin McQueen, Strategist

EUR/USD, EURGBP Price Analysis & News

  • EUR/USD Rejects 1.20 Again EUR/USD
  • EUR/GBP Rallies to be Faded
  • German Labour Market Remains Firm Despite Lockdown 2.0
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EUR/USD Rejects 1.20 Again: With month-end noise out of the way, markets can now focus on the longer-term themes. Yesterday’s price action had been rather choppy with EUR/USD once again failing to convincingly break above 1.20. However, dips have been short-lived with the USD based view that rallies in the greenback are likely to be faded. Particularly as the longer-term view remains that 2021 will see a strong cyclical rebound thus benefitting USD counterparts. In the option space, sizeable expiries at 1.20 (1.7bln expiring on Friday) looks set to magnetise spot Euro. In turn, dips are likely to find good support, particularly down towards 1.1920 as long as markets remain risk-on. Elsewhere, on the data front, market focus will be on the ISM Manufacturing PMI, where a firmer than expected reading could see a brief pullback in EUR/USD.

Short-Term Technicals

Support: 1.1950, 1.1900, 1.1870Resistance: 1.1980, 1.2000, 1.2030

EUR/GBP Rallies to be Faded: The bias remains for EUR/GBP rallies to be faded. While time is seemingly running out as we near the end of the transition period and with key issues yet to be resolved, the consensus remains that an EU-UK trade agreement will be struck, thus taking a no-deal off the table. Yesterday’s struggle at 0.90 reinforces the view that brief spikes in the cross will find firm resistance. That said, while the 0.8900 offers good support, 0.8860 is the key level on the downside where a close below opens up the door to a slide towards 0.8700.

German Data Recap: The latest German jobs report reaffirms the case that the labour market remains a bright spark within the economy. Perhaps what is more surprising is that the better than expected report has also come at a time where a second national lockdown had been implemented. The German unemployment change fell by 39k, bringing down total unemployment seasonally adjusted to 2.817mln. The unemployment rate fell to 6.1% from 6.2% in October.

According to the German labour market agency, the number of people on short-time work schemes, which have shielded the labour market from the brunt of the pandemic, fell to 2.22mln in compared to 2.6mln in the prior month and a peak of nearly 6mln reached in April at the height of the pandemic.

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