The Euro resumed growth after the publication of the draft Declaration on Brexit
The Euro and the pound started to rise after the publication of the draft Declaration between the UK and the European Commission. The market reaction looks quite reasonable, as this is not the end of negotiations on Brexit. However, now the currencies, there is a good chance to fundamentally turn around to the upside.
2018й a year of trade conflicts, which undermined demand for risky assets and, more importantly, noticeably cooled the growth rate of the world economy. It so happened that Europe was indirectly affected in several situations. It disputes on trade with Britain, and reduced demand from China due to the trade wars in the U.S., and directly to the American tariffs on European products and the response of the EU. The majority of investors are still skeptical regarding further negotiations on all these points: changing attitudes can be a factor supporting sterling.
The British currency since August several times received support on dips to the 1.2700 area. Often, for the rebound was the progress in the negotiations on withdrawal from the EU. In previous times GBPUSD managed to reach the region of 1.31-1.32. Now, however, an important obstacle to growth is the vote in the Parliament of the United Kingdom, which will take place in the second week of December.
The single currency though, and retreated last week from a 17-month lows, but now calls into question the downward trend of EURUSD pair. A break above 1.14 can become a signal of confidence in the players future prospects. In addition, on the side of the Euro, several fundamental factors: QE from the ECB by year-end and move on to the next stage in the form of higher rates.
Pay attention to the technical picture. The pulses weakening of the Euro since may has sent the EUR / USD pair to the new local lows. However, the RSI indicator is marked by a succession of more serious cuts, reflecting the attenuation of the pulse. Such divergence could be the starting point for rollback pairs in the area 1.17 and become the basis for a more substantial rally in the region 1.23 – probably already next year.