The outgoing year was marked by a low volatility for the EUR/USD pair. Price fluctuations were the weakest since the introduction of the single currency in circulation. The pair met 2019 at 1.1452, while now the price is being traded in the region of the 12th figure. It is noteworthy that the price did not rise above the 14th level - the high of the year was fixed at 1.1489. The EUR/USD bears can boast of brighter achievements - they were able to push the price to the eighth figure in early autumn. The support level of 1.0880 turned out to be too tough for sellers, so the pair returned above the 1.1000 mark in November.
Thus, the pair fluctuated within the 500-point range for 12 months. For comparison, in 2017, EUR/USD traders strode by almost 1700 points, rising from the third figure to 1.2000. Last year was also quite volatile - the pair rose from 1.2000 to 1.2500, after which it gradually decreased over the course of six months, reaching the 12th figure. Compared to such price fluctuations, the outgoing 2019 year looks faded. In fact, the price was circling around the 10th level, and the bulls and bears only "pulled the rope" - sellers made an attempt to go below the 9th figure, buyers tried to rise above the 14th. But in fact, the EUR/USD pair ends the year at almost the same level where it met (with a relatively small decrease). All this suggests that the main battle between bulls and bears is yet to come.
Toward the close of 2019, the financial world was able to breathe a sigh of relief: China and the United States escaped the escalation of the trade war, and the British Parliament approved in the second reading a bill on Britain's exit from the European Union. The overall tension in the foreign exchange market decreased, which made it possible for the European currency to show character. In turn, the dollar came under significant pressure. The US currency was used as a safe haven in a period of uncertainty, while now the anti-risk sentiment has been replaced by a craving for risky assets. In addition, the US regulator continues to conduct overnight repo transactions, and this factor also exerts background pressure on the greenback, especially against the background of the thin market. This state of affairs will remain at least until the beginning of next week, until traders are finally included in the operating mode.
If we talk about longer-term prospects, then here we are again returning to the old problems, which will remind ourselves in 2020. The focus of dollar pairs will continue to be on the trade conflict between the US and China, while the EUR/USD pair will also respond to the events around Brexit. The signing ceremony for the first phase of the deal between Washington and Beijing is due this weekend. However, then the parties will begin negotiations on the second part of the trade agreement, where the most complex and strategically important issues will be discussed. This negotiation process will be the #1 topic for dollar bulls - only the US presidential election (November 2020) can overshadow this fundamental factor. Donald Trump expects to sign the second phase of the transaction before the voting day. He needs a victory in a trade war, while the Chinese are counting on a change of power on the American political Olympus. Obviously, Trump will put pressure on China, threatening to tighten the terms of the deal in the event of his re-election. Whereas the current ratings no longer speak of the clear leadership of Joe Biden.
Moreover, according to recent opinion polls, the current president maintains strong positions in key states, on which the outcome of the elections will most likely depend. The latest opinion poll shows that the head of the White House at the national level is ahead of all the main candidates from the Democratic Party. Such circumstances may have a corresponding effect on the obstinacy of the Chinese side. In any case, the negotiation process between the United States and China will have a strong impact on dollar pairs, including EUR/USD. If the parties nevertheless come to a compromise, the euro will receive strong support, as the head of the ECB associates the risks of a slowdown in economic growth in the eurozone with geopolitical factors. De-escalation of the protracted conflict will allow the European Central Bank to maintain a wait-and-see stance on the issue of monetary policy, and given the growth of key indicators, even think about raising the interest rate (especially against the background of side effects of the negative rate).
The Brexit problem will also "sparkle with new colors" in 2020. The recently passed bill suggests that the transition period ending December 31 of next year will not be extended, and that concluding a trade agreement with the EU after Brexit could do without the consent of the House of Commons. This document has not yet been finalized - it will have to go through the third reading next month, and then the millstone of the House of Lords. Conservatives now have their own majority in the Lower House of Parliament, so with a high degree of probability it can be assumed that Britain will leave the EU before January 31, after which negotiations will begin within the transition period.
According to many experts, the parties will not have time to agree on a trade agreement before the end of next year - the head of the European Commission has already expressed willingness to extend the negotiation period for another year or two. But Johnson is still taking a tougher stance on this issue. The increasing tension between London and Brussels will put pressure not only on the pound, but also on the euro. But if the parties nevertheless find a common denominator (at least in determining reasonable terms for the transition period), the British currency will pull the euro along with it.
In general, most experts are inclined to believe that the coming 2020 will be, firstly, more volatile, and secondly, less successful for the US currency. In the context of EUR/USD, this means that in the long run the pair may rise to the middle of the 17th figure (i.e. to the upper line of the Bollinger Bands indicator on the monthly chart, which coincides with the Kijun-sen line). The next resistance level on the MN timeframe is at 1.2150 (the upper boundary of the Kumo cloud). However, it is too early to speak about these price heights. Moreover, judging by the intensity of the upward movement, we can assume that a corrective pullback to the region of the 11th figure is quite likely in early January.
The material has been provided by InstaForex Company - www.instaforex.com