The EU's chief Brexit negotiator, Michel Barnier, warned on Monday that negotiations on a future trade agreement with the European Union could fail if the parties do not make concessions to each other by the end of the day. At the same time, Barnier said that it is the tough position of the British negotiators that does not allow us to move forward. The focus of the afternoon will be shifted to the conversation between British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen. The conversation will take place this evening and will be a crucial moment in the UK-EU trade relationship. During a briefing in Brussels, Michel Barnier noted that the next step to the EU meeting should be made by Boris Johnson while making a negative statement that the parties are as close as possible to a breakthrough in their differences over fishing and areas where it can be conducted by European companies.
Against this background, the British pound quickly fell against the US dollar, as in the event of unsuccessful negotiations between the two politicians, the probability of concluding a trade agreement will quickly tend to zero since there will simply be no time for this. Barnier said he was pessimistic about the prospects for a deal, but expressed hope that Johnson and von der Leyen would be able to reach a compromise tonight.
Therefore, the focus is on the second half of the day and the news that will be related to these negotiations. In the event of a breakout, the level of 1.3250 will only be the beginning of a prolonged downward trend, which will lead to an update of the lows of 1.3115, 1.2970, and 1.2810. If the parties still make concessions to each other, the pound will quickly be able to win back today's fall and even achieve fresh highs around 1.3610 and 1.3750, where the bullish momentum may slow down again.
Let me remind you that the market has more expectations that the deal will be concluded. Therefore, in the event of failure, the fall of the pound will be much stronger than in the case of growth, which will occur when an agreement is reached. The latest futures report on the positions and balance of power of large non-commercial players clearly shows a tendency to resume the bullish trend. In the December 1 reports, Commitment of Traders notes significant interest in the British pound. Long non-commercial positions rose to a level of 37,087 and at the same time, short non-commercial positions decreased to 44,986. As a result, the negative non-commercial net position was -7,899 against -17,130 a week earlier. And although this does not indicate that the sellers of the British pound remain in control and that they are outweighed in the current situation, the market is gradually beginning to come back to risks, and reaching a trade agreement will help it in this.
EURUSD
Now for the $ 908 billion aid package that has been talked about over the past week, which will be aimed at fighting the coronavirus pandemic. Party negotiators on the above aid package from both sides plan to release more details today on how they will try to satisfy fairly pragmatic Republicans and embezzled Democrats. This will allow the agreement to pass through Congress before the end of the year. Last week, both parties were optimistic about the new package of measures, and House Speaker Nancy Pelosi called for support for the new bill. Some Republican senators have expressed confidence that President Donald Trump and Senate majority leader Mitch McConnell will support a plan that will help the country fight the second wave of the coronavirus pandemic. As some experts note, this is not a bill on new incentive measures. This is a bill to help those who are in dire need of it now.
As for another problem that the European Central Bank is already facing. We are talking about a major increase in the euro, which was observed last week after the news about the coronavirus vaccine appeared. The fact that the euro is now around the 22nd figure creates clear problems for the European Central Bank, which may try to make a verbal intervention against the single European currency this Thursday. However, the Bank's rhetoric alone will not be enough to deter investors who believe in strengthening risky assets at the beginning of a medium-term upward trend. The maximum that the ECB will get is to delay the growth of the European currency against the US dollar and achieve the return of EURUSD to the area of the 19th figure. The European Central Bank may also make significant policy changes, which will allow us to talk about a larger return of pressure on the European currency. This scenario will open a direct road to the area of 1.1840 and 1.1790 levels. A break in the resistance of 1.2175 will lead buyers of risky assets to new highs around 1.2260 and 12340.
Now for today's numbers. Industrial production in Germany grew quite strongly in October this year, which once again highlights the active state of the economy even during its partial lockdown. According to the Federal Bureau of Statistics Destatis, German industrial production increased by 3.2% compared to the previous month. Economists had expected growth of 1.5%. Compared to the same period of the previous year, production has not yet recovered and fell by 3% in October.
CAD
The Canadian dollar continued to strengthen its positions against the US dollar on Friday, however, the movement stalled during today's European session, after which traders rushed to fix positions, which led to a slight rebound up.
Good data on the number of jobs in Canada in November 2020 led to the strengthening of the pair, as this indicates that the market will continue to grow even at the time of the second wave of coronavirus. The unemployment rate also fell, however, this was only since many stopped trying to find a job. According to the statistics agency, the number of jobs in Canada increased by 62,100 in November, while economists had expected an increase of 20,000. The unemployment rate in November in Canada was 8.5% compared to 8.9% in October.
As for the technical picture of the USDCAD pair, its further decline has so far stopped in the area of 1.2771 and traders are not taking new steps yet. A good breakout of the level of 1.2930 has played itself out to the full and now the bulls will try to return to it, so we can expect an upward correction. A breakout of 1.2770 will open new lows for the trading instrument in the area of 1.2680 and 1.2600.