It would seem that Christmas has come early in Europe as rumours and signs of progress have been emanating from the Brexit talks over the last 24 hours. The Christmas spirit of compromise and good will has push negotiators together and a draft deal is being written up with the final details being ironed out. Perhaps it was the realisation that Boris Johnson harpooned himself with his “love actually” doorstep Brexit/campaign ad 12 months ago, in which he said, “with any luck, by next year we will have Brexit done” subconsciously forcing his own hand. Or perhaps the act of the French working so diligently with the UK earlier this week to get the transport of freight moving after the forced lockdown due to the new strain of Covid-19 discovered in the UK, that opened participants eyes that it is better to work together for the greater good than to bicker over negotiations that result in what can only be described as a near Christmas miracle. Markets have reacted to the rumours with a risk on moved in European equities and a gain in GBP and EUR. GBPUSD surged to the 1.3500 area. The German 30 Index pushed higher along with the UK 100 despite the strength in GBP. It has been reported by a French Government source that the UK made huge concessions on fisheries in order to step closer to a deal. It is expected that if the agreement can stick, it will be provisionally announced this morning. It is make or break time as today is the last moment at which a deal can be provisionally applied on 1 January. It is already too late for the European Parliament to formally ratify the proposed deal and it will also have to be technically agreed upon by EU Member states. But a deal ensures the UK has access to the EU single market tariff free. The chaos at Dover this week has also been an eye opener and is believed to have focussed the minds of politicians and civil servants to get a deal across the line.
The focus of the calendar today will be on Brexit trade deal press conferences and statements that will be potentially market moving in light liquidity holiday conditions.
The USDJPY is consolidating after it found resistance at the 105.678 level last month and went in search of support with a move that took price down to 103.180 area. Support was broken around the 104.000/103.850 area followed by 103.500. The loss of this area opened the way to 103.300, with further support at the 103.150 level, which is followed by 103.180 and the 103.000 area. The 102.900/102.800 area may also provide some support on a break of 102.750 followed by the 102.500. This is in turn followed by potential support at 102.275. The 102.000 level may be used in price break these potential support with a view to testing down into 101.000.
In the short term the 103.500 area is being tested followed by the 103.685 level and 103.910. The potentially resistive 104.000 area is followed by 104.480/104.500, 104.750 and 105.000. The 105.500 area is acting as resistance followed by 106.000, 106.500 and the former support levels at 106.680/106.630. Above the 107.000 round number, the 107.680/107.600 area, may be used as resistance, followed by 108.000 and 108.480, with the 109.500 area above. A rally above the 109.500 level may seek to take price up to engage the 109.700 area of resistance from December which is followed by the 109.850/110.000 area. This area has acted on price in the past and was retested as resistance in February, with a breakout to the high at 112.227. The lower high at 111.700 may also act as resistance. A break above this area may open the path to the pair potentially attempting to gain a foothold above this resistance and establish a base to engage the 113.000 area. A break above this level may seek to test the 114.000 level followed by the potential resistance at 115.000.
The EURGBP chart is showing that the pair has broken down from the March high, 0.9500 level and is currently trading around 0.9000 after finding support at 0.8865. The pair tested 0.9292 early last month and has created lower highs at 0.9230 and 0.9217. The pair is now trading at the 0.9000 round number, after breaking the level yesterday. Support has been re-established at the 0.8865 area as the key support as the June low. This is creating a temporary floor under the price action. Support at 0.8813 is followed by the 0.8750 area and the 0.8700 level. A loss of this level may push price down to 0.8660 level. Support may be seen at 0.8645 followed by 0.8620/0.8600. Below this level, the 0.8500 area may be supportive again, followed by the 0.8412 area. The low at 0.8276, from December 2019, and then the 0.8250 level may also be used as potential support for the pair.
Resistance may be used at 0.9050/0.9065 followed by 0.9084 area, followed by 0.9068. The area above 0.9100 may continue to offer resistance, with a focus on 0.9150 followed by 0.9177. The 0.9200 round number may provide further resistance followed by the 0.9235 area. A move back higher from there, targets the 0.9250 area, followed by the higher high at 0.9275. Above this area the 0.9290/0.9300 area comes into play followed by the August high around 0.9323. The current high at 0.9500 remains the level to beat for buyers. A break higher may seek to test the 0.9550/0.9560. Beyond this the potential resistance area at 0.9620 might be used ahead of the 0.9700 level. The next area of interest may be found at 0.9720, followed by 0.9750 which may also be used as resistance to any potential move higher, while above the area the 0.9800 area may further resist attempts to push price up to the 0.9900 level. The round number level may also come into play at 1.0000.