EUR/USD Daily Forecast – Euro Struggles to Hold Above 100 DMAEUR/USD pared gains for a second consecutive session on Tuesday after headlines indicated a Brexit deal is not likely to materialize before the October 31 deadline.
Negative Brexit News Pushes Euro Lower
EUR/USD came under renewed pressure in late-day trading on Tuesday after UK PM Boris Johnson was delivered a defeat in parliament.
Johnson was looking to pass through an expedited timetable for finalizing the EU withdrawal bill, a crucial element of the exit process. However, he didn’t have the votes, and at this stage, it does not look like an orderly exit will happen by the October 31 deadline.
At best, the withdrawal bill could pass by next week if he gets the votes. The actual Brexit deal would still need to be voted on and the EU would have to give final approval. With new uncertainties emerging from yesterday’s vote, Sterling and the single currency have both come under some renewed pressure.
Johnson has now passed the buck onto the EU who will decide on an extension. It seems like they have two options, a technical extension to facilitate the process of passing the deal that is on the table now, or a lengthy extension which would involve an election. The former will tend to be bullish for both the euro and pound while the later could trigger a notable drop in both currencies.
Support for EUR/USD is seen near 1.1129 and has not shown a strong presence of buyers as of yet. The level carries confluence with the 100-Day moving average and could be a near-term line in the sand.
It’s not surprising the pair has struggled to hold above it considering yesterday’s developments. At the same time, it’s noteworthy that the pair has contained losses generally speaking.
In this context, if the pair regains this area we could see sentiment reverse back to bullish. But ultimately it will depend on how the EU reacts as the euro is still largely impacted by Brexit developments.
While below 1.1129, the next main area of support I am looking at falls at 1.1072.
- Negative Brexit developments have weighed on the pair, driving EUR/USD below support near 1.1129.
- While the pair has fallen below support, it has not been with conviction.
- Further price action could offer a tell, however, further developments in Brexit talks should ultimately drive the pair.