09.01.202008:17 Forex Analysis & Reviews: GBP/USD and EUR/USD: Which direction will the British pound choose at the beginning of this year?

While the Brexit bill is under discussion in the UK Parliament and many are waiting for its ratification that will allow Prime Minister Boris Johnson to leave EU at the end of January this year, many experts and economists are wondering whether the government will be able to develop a sufficiently complete agreement this year that will ensure the trade relations of the parties in the future.

One of the key challenges is reaching an agreement on EU access to the UK fishing areas. An important issue that will be included in the base agreement also applies to the standards in the field of ecology and labor protection. EU has quite strict rules in this regard, which UK apparently does not intend to comply with after the divorce. Also, do not forget that Brussels insists on an agreement on cooperation in the field of security, which is about the access to the databases of law enforcement agencies and security services, as well as the extradition procedure.

A number of experts note that agreements in the field of transport, electricity, etc. will be added to the base agreement much later. As for the British services sector, which remains outside the framework of the original agreement, these negotiations may be delayed for a very long time. This will affect the state of the UK labor market and tax revenues, including the entire economy as well.

In any case, if a compromise is reached on the main issues, there will be an agreement that will be a powerful impetus for the British currency, no matter what consequences the further divorce will bring. Investors and traders need specificity and stability, and the rest is a matter of time. If Brussels and the UK fail to agree on these topics, and a divergence of views in the initial negotiations at the beginning of this year happens, we can expect the pressure to maintain on the pound. However, each of its decline will be an occasion for a return to the market of medium-term buyers, betting on improving the situation in the future. Any major decline in the pound will only be welcomed by the major players.

As for the shorter-term direction of the British pound, the further course of the pair will depend on how they will show their selves in the support area of 1.3050, or in the resistance area of 1.3200. Breaking these levels will ensure the demolition of a number of stop orders and determine the direction. The nearest support levels are 1.2970 and 1.2830, while the nearest resistance levels are 1.3290 and 1.3360.

EUR/USD

Yesterday's data on the US labor market returned the demand for dollar. According to a report by ADP, the number of jobs in the US private sector increased by 202,000 in December 2019, which was much higher than the forecasts of economists, who had expected an increase of only 147,000. A large growth (88,000 jobs) was particularly observed in medium-sized companies with 50 to 500 employees. Small companies have created 45,000 jobs. In line with this, a more important report on non-agricultural jobs for December will be released tomorrow. An increase of 160,000 is expected, with unemployment at 3.5%.

Although it came out worse than expected, the data on the growth rate of lending in the United States did not have a serious impact on the short-term market,. According to a Fed report, unsecured consumer lending rose to 3.61% in November, after rising to 5.49% in October. Total consumer lending rose by $ 12.51 billion from the previous month, whereas economists had expected it to increase into $ 15.5 billion. Renewable loans fell by 2.69%, as compared to the same period of the previous year.

As for the technical picture of the EUR/USD pair, the bears have reached another important level of support. Its further direction will depend on the fundamental reports on Germany and the US labor market. A breakthrough in the support of 1.1100 will provide the market with new sellers capable of pushing risky assets to the lows of 1.1040 and 1.0980. If buyers of euro manage to regain the intermediate resistance of 1.1130, there is a possibility that the pair will bounce up to the highs of 1.1170 and 1.1210.