The last trading day of the year marked a rough month for the dollar on the back of technical and risk appetite factors above than anything else.
Christmas trading has been typically soft throughout the years, but that was not the case for 2019. A series of breakouts were seen, and they were not attributed to geopolitics.
That being said, trade war and Brexit headlines are going to take their toll in January.
Euro Up on Dollar Weakness
Despite having risen against a weaker dollar amid recent Fed caution and weaker eco data, the euro started the year soft.
The trade war was seen as positive for the dollar, owed to safe-have flows. This could weigh on the euro over the next few weeks as Trump pushes for a January 15 phase one trade deal.
In addition, there is an assumption that Lagarde is ready to launch a dual interest rate policy in order to provide a more effective QE. This is a strategy that points to a somewhat more powerful stimulus since interest rate cuts haven’t really boosted the European economy.
EURUSD Breakout Running Out of Steam
The prices of eurodollar reached a multi-month high at 1.1239 last Tuesday, suggesting that 2020 could provide further upside. Both indicators point to a correction at least in the short-term, if not a reversal.
With 1.12 round support taken out once already, the chances of additional weakness are increasing. This could take prices down to 1.1175, provided any bullish attempt is rather soft.
Brexit Uncertainty Caps Pound Gains
Boris Johnson’s election win reduced political uncertainty near the end of a challenging year. However, Britain has a huge decision to make by the end of January. This should keep any upside limited to previously taken-out levels until Brexit gives way to significant flows.
GBPUSD Tests Golden Ratio Near 1.33
Recent political developments have helped the pound move higher over the past few trading sessions, trading near 2018 highs. The correction down to 1.29 could, however, weigh on cable more than expected.
With 1.3285 tested, bears could lead the markets lower towards 1.29 once again. This assumes that 1.33 round resistance holds firm in case of a bullish takeover attempt.
Gold Bid As Markets Expect Better Growth in 2020
A weaker dollar and upbeat 2020 expectations powered the yellow metal to September highs on Tuesday. Traders are anticipating stronger economies on the back of a trade deal as expectations of a Jan 15 deal increase.
Despite political risks deteriorating, keep in mind that global easing fears could easly add up on the latest demand.
XAUUSD Bulls Take a Breather From $1515 High
Gold hit a two-month high in the last trading session of the decade, closing on a technical advantage above the 1515 support. The next level for bulls is near the 1550 round resistance. However, a short-term take-profit could be seen pulling prices back towards 1509. A break above 1525 would suggest otherwise, however.