FX.co ★ GBP/USD and EUR/USD: Bulls are building up long positions at every opportunity.

News broke yesterday that the European Parliament has approved the Brexit trade deal, however, it was only temporary and its full approval will be considered at the next council session in March 2021.

After a brief consultation with the European Commission, the leaders of the EU Parliament said they support the provisional application of the agreement, but at the same time stressed that they, including the European Commission, should study in more detail the proposal to extend the period of application, as such will allow the parliament to more quickly ratify it at the session in March.

But despite this, the British pound is dropping, especially since there are still unsolved problems between the UK and the EU. In particular, central banks, trading floors and fund managers are seriously worried about a rupture in the financial system, because ever since the UK voted to leave the European Union in 2016, little has changed towards building future relationships between their financial industries.

In a recent interview, UK Treasury Secretary Rishi Sunak said that negotiations regarding access to financial services will continue after the end of the transition period, and both sides claim that by March 2021, they will seek to sign a memorandum of understanding on cooperation in the field of financial regulation.

However, such did not impress banks such as JPMorgan and Goldman Sachs, which, in recent statements, warned about possible relocation to EU cities. In turn, supervisory authorities of the European Central Bank cautioned financial giants over opening offices only by registration, because in order to be able to transfer in the EU, JPMorgan, Goldman Sachs and other financial institutions wishing to leave the UK will have to deal with staff transfers, compliance and operational management directly within the bloc. According to the consulting company EY, about 7,500 workers are currently being relocated.

Meanwhile, with regards to the GBP / USD pair, the key level for today is 1.3435, and a breakout from which will lead to a sharp drop towards the 33rd figure, or even to 1.3190. But if the quote consolidates above 1.3530, GBP / USD will move towards 1.3620, and then to 1.3750

In line with this, according to the latest Commitment of Traders report, long non-commercial positions in GBP / USD increased from 35,128 to 37,550, while short non-commercial positions remained practically unchanged and increased only from 31,060 to 31,518. As a result, the non-commercial net position remained positive and grew to 6,032, much higher than its 4,068 figure a week earlier. All this suggests that traders continue to bet on the strengthening of the pound, even in the face of its decline. It seems that the more the currency collapses at the end of this year, the more its demand will increase in the future.

USD: According to the latest data, sales in the US during the holiday season exceeded expectations due to a sharp rise in online sales. A report published by the Mastercard SpendingPulse, which tracks online and in-store retail sales, indicated that total retail sales from the period of October 11 to December 24 rose 3%, while economists had expected growth of only 2.4%. This suggests that consumer demand is constrained not by the desire to resort to accumulation during a possible recession, but by strict quarantine measures, in particular, the closure of many retail stores and outlets, which forced consumers to shop online.

The growth in online sales, even amid the problems brought by the coronavirus pandemic, confirms the resilience of the economy. Online sales are up 49% from last year, which suggests that e-commerce now accounts for every $ 5 spent.

With regards to the EUR / USD pair, the key level today is 1.2175, and a breakout from which will lead to a reversal and formation of a new downward trend in the market. There is also a chance that traders will close positions at the end of this year, which could push the euro towards 1.2080 and 1.2040 by the end of this week. But if the quote consolidates above 1.2255, EUR / USD could move towards 1.2310 and then to 1.2350.

According to the latest Commitment of Traders report, long non-commercial positions in EUR/USD rose from 218,710 to 222,443, while short non-commercial positions jumped from 76,877 to 78,541. The total non-commercial net position rose to 143,902, from 141,833 a week earlier. Since growth has resumed, the euro will most likely rise in the medium term.