Brexit and US elections Hinder Investor Sentiment
The economic implications of the Coronavirus pandemic continue to weigh down on the world’s two largest economies as the second wave of the virus remains a hindrance to economic recovery. As France and Northern Ireland implement additional lockdown restrictions to curb the intensified number of new Covid-19 related cases, German chancellor Angela Merkel has warned that Germany cannot afford a second lockdown.
This comes at a time where political pressure looms ahead of Brexit as well as the US presidential election.Brexit negotiations are once again underway in a two-day summit being held in Brussels, after Boris Johnson previously stated that today would be the deadline for a deal to be possible. Now, it appears that a decision should be made by the end of the week which may be an additional driver of price action.
Meanwhile, in America, hopes of additional stimulus have faded as US Treasury Secretary, Steve Mnuchin, indicated that it is highly unlikely that a second coronavirus relief bill would be released before the elections on 3 November 2020.
EUR/USD Confined to Key Fibonacci Levels
On the technical front, the weekly chart below highlights how the Fibonacci levels have kept both bulls and bears at bay, providing support and resistance for themajor currency pair. Currently, the 23.6% and 38.2% Fibonacci retracement level from the medium-term move (2 Jan 2017 low to 12 Feb 2018 high), has formed an area of confluency, with price action trading between these levels for the past 3 months. However, after failing to break through the psychological level of 1.2000, prices have retraced back to the 38.2% level at 1.17101.