Brexit Talks Stand to Drive Volatility to EUR/USD
Price action in the FX markets on Tuesday provided a glimpse of which currencies are likely to see a reaction based on how things progress with reaching a Brexit deal.
Since last week, the British pound has been firmly bid and was last seen trading near highs not seen since June against the dollar. But yesterday’s surge higher in GBP/USD accompanied a bullish reaction in EUR/USD which we’ve not seen before.
EUR/USD had declined below the 1.1000 handle and then rallied nearly 50 pips in 30 minutes on Brexit news. This suggests if Brexit talks are favorable, EUR/USD is likely to continue its recent upward trend.
So far the 50-day moving average has been holding the pair lower on a daily close basis. But the indicator is not likely to be much of a hurdle on positive Brexit news. We are likely to get some market-moving news later today as Brexit negotiations will stop before the EU summit which starts tomorrow.
EUR/USD Little Changed After CPI Data
The consumer price index in the Euro zone was reported to rise at the slowest pace in nearly three years. Meanwhile, core CPI, which strips away volatile items such as food, energy, alcohol, and tobacco, remained unchanged at 1% in the year to September. The exchange rate had a muted reaction to the report.
Two items have been capping rallies in EUR/USD. A horizontal level at 1.1059 and the 50-day moving average.
If we get some further positive Brexit news, I’d expect this area to be breached, putting in focus resistance at 1.1129. This is a level that was major support April and in May.
In the absence of news, I expect that sellers will try and drive the pair lower once again. Although we may see buyers step in ahead of yesterdays low just below 1.1000, this continues to be an important area for the pair.
- Headlines related to Brexit stand to move EUR/USD and today could be a volatile day for the pair.
- Euro zone CPI data fell short of expectations but did not have an impact on the exchange rate.
This article was originally posted on FX Empire
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