EUR/USD Mid-Session Technical Analysis for December 28, 2020

The Euro is trading higher against the U.S. Dollar at the mid-session on Monday as risk sentiment was boosted by Britain reaching a trade deal with the European Union.

Britain clinched a narrow Brexit trade deal with the European Union on Thursday, just seven days before it exits one of the world’s biggest trading blocs in its most significant global shift since the loss of empire.

At 19:18 GMT, the EUR/USD is trading 1.2209, up 0.0019 or +0.15%.

The Euro is also being supported by risk sentiment, which improved after U.S. President Donald Trump on Sunday signed into law a $2.3 trillion pandemic aid and spending package, restoring unemployment benefits to millions of Americans and averting a federal government shutdown.

Traders should continue to expect heightened volatility and the possibility of exaggerated price swings due to thin holiday volume.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, Monday’s inside move suggests investor indecision and impending volatility.

A trade through 1.2298 will signal a resumption of the uptrend. The main trend changes to down on a move through 1.2059.

The minor trend is also up. A trade through 1.2130 will change the minor trend to down. This will also shift momentum to the downside.

The first minor range is 1.2130 to 1.2298. Its 50% level at 1.2214 is currently being straddled.

The second minor range is 1.2059 to 1.2298. Its 50% level at 1.2179 is also potential support. It was tested earlier in the session when the selling stopped at 1.2181.

Short-Term Outlook

Given Monday’s two-sided trade, the direction of the EUR/USD into the close is likely to be determined by trader reaction to 1.2214 and 1.2179.

Bullish Scenario

A sustained move over 1.2214 will indicate the presence of buyers. If this move generates enough near-term momentum, we could see a retest of last week’s high at 1.2298. However, some traders think this high was an aberration because it was created on December 25 when most of the major Forex countries were on a bank holiday.

Bearish Scenario

The inability to overcome 1.2214 will be the first sign of weakness, while taking out 1.2179 could trigger an acceleration to the downside with 1.2130 the next likely target.

Side Notes

Given the extremely low volume, we’re likely to see a choppy, two-sided trade with the key levels to watch a pair of 50% levels at 1.2214 and 1.2179.

Basically, an upside bias could develop on a sustained move over 1.2214, and a downside bias could be created by a sustained move under 1.2179.