The euro has reversed directions on Thursday and headed lower. Currently, EUR/USD is trading at 1.2231, down 0.55% on the day.
US jobless claims drop
It’s a very light data calendar on Thursday, with no eurozone releases. In the US, today’s highlight was unemployment claims, which bucked the trend and surprised analysts with a decline, falling from 803 thousand to 787 thousand. This figure easily beat the estimate of 832 thousand. The US dollar has moved higher on the positive data, but one strong reading does not make a trend, and the economic projections are for a deteriorating US labour market, due to a resurgence in Covid-19 and colder weather, which means shorter hours for many businesses. The New Year could start on a sour note, as the consensus forecast for December nonfarm payrolls is only 69 thousand, compared to 245 thousand in November.
Brexit has arrived!
After a long and winding road with plenty of drama and umpteen deadlines, the UK will finally set sail from the European Union on December 31st at midnite. Perhaps the nuance that the midnite deadline (Brussels time) occur at 23:00 GMT in the UK encapsulates the non-ending arguments, threats and salvos that have accompanied the talks ever since the historic referendum back in June 2016. Indeed, after following and writing about Brexit for over four years, I must confess to some surprise that the sides somehow managed to hammer out an agreement and avoid a no-deal Brexit.
Britain may be about to leave, but Brexit is sure to remain with us for a long time to come. London and Brussels have grudgingly come to terms on a divorce agreement, but disputes are sure to occur which could affect both the euro and sterling. Time will tell if the agreement’s enforcement mechanisms resolve matters in a satisfactory manner, or will we be witness to more bad blood between the sides. The UK parliament approved the deal on Wednesday, and the European Parliament is expected to follow suit early next year. The new agreement faces its first test on January 1st, with some fears that the new trade regulations will result in disruptions to the flow of traffic between British and European ports.
- EUR/USD is facing resistance at 1.2283. The next resistance line is 1.2374
- There is support at 1.2115, followed by a support line at 1.2038
- The pair crossed below the 10-day MA line in the Asian session and continues to move lower
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