Euro rally punches above 1.23

The euro continues to make inroads and is in positive territory for a third successive week. Currently, EUR/USD is trading at 1.2287, up 0.31% on the day.

EU approves investment accord with China

In the post-Brexit era, the EU is determined to deepen trade relationships around the globe. With the Biden administration expected to move quickly to improve relations with China after the Trump years, the EU has entered into an investment agreement with China that will provide European businesses with preferential treatment compared to US companies. The deal will open up China to greater investment by EU companies and facilitate increased Chinese investment in the EU. As well, the accord could provide momentum for an EU-China free trade agreement.

Brexit signed but concerns remain

There was a huge sigh of relief on both sides of the English Channel last week, as London and Brussels finally signed the dotted line on a Brexit agreement. After difficult and often acrimonious negotiations between the sides, the markets are pleased that an agreement is in the books after 4½ years of uncertainty since the shocking Brexit referendum in 2016.

A Brexit deal will remove the specter of tariffs and duties on goods moving between the UK and the EU, but there are now concerns that new regulations could interfere with trade between the parties. These fears have intensified after chaotic scenes of thousands of trucks stuck in the port of Dover last week when France closed the border after a mutation of Covid-19 appeared in the UK. The new regulations, which come into force on January 1st could result in a slowdown in the flow of traffic and weigh on the euro.

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EUR/USD Technical

• EUR/USD tested resistance at 1.2299 earlier in the day. Close by, there is resistance at 1.2328
• There is support at 1.2216, followed by a support line at 1.2162
• The pair crossed above the 10-day MA line earlier in the week and continues to move higher

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