EUR/USD: Fiscal-cliff drama to dominate Christmas week



EURUSD Movement

For the 24 hours to 23:00 GMT on Friday, EUR declined 0.38% against the USD and closed at 1.3188, as investor risk appetite continued to decrease a day after the Republican “Plan B” effort to avoid the fiscal cliff resulted in a failure.

However, over the weekend, US President, Barack Obama urged the lawmakers to accept a scaled backed deal, including an extension of tax rates for households with income below $250,000, to avert the “fiscal cliff” in time.

Over the weekend, the European Commission indicated that it intends to give Spain, France and several other Euro-zone states more time to cut their public deficits below the target limit of 3% of GDP.

On the economic front, consumer sentiment in Germany is expected to drop to 5.6 in January, from a revised value of 5.8 in December. Meanwhile, the business confidence indicator for the manufacturing industry in France rose to a reading of 89.0 in December, compared to a reading of 88.0 recorded in November.

Separately, in the US, the personal spending climbed 0.4% in November, compared to an upwardly revised 0.1% drop recorded in the previous month. Separately, the Federal Reserve Bank of Kansas City reported that its manufacturing activity index rose to a reading of -2.0 in December, from a reading of -6.0 posted in November.

In the Asian session, at GMT0400, the pair is trading at 1.3185, with the EUR trading marginally lower from Friday’s close.

The pair is expected to find support at 1.3152, and a fall through could take it to the next support level of 1.3119. The pair is expected to find its first resistance at 1.3225, and a rise through could take it to the next resistance level of 1.3265.

With no major economic news in the US and Europe, investors keenly await Washington lawmakers to come back for the 27th to start again with ‘fiscal cliff’ negotiations. Investors will be looking for any effort this week to salvage negotiations to avert billions in automatic tax hikes and spending cuts due to begin in the new year, unless a deal is reached.

The currency pair is showing convergence with its 20 Hr moving average and is trading below its 50 Hr moving average.

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