A week before Christmas Day, EUR/USD finally broke out of the narrow range and chose a direction: up. The pair crept above 1.3170 and eventually began a Santa Rally that sent it levels last seen in early May. Progress on the fiscal cliff, despite public blaming, seems to be the key. Where next?
Euro/dollar reached 1.3232 before ticking a bit lower. Significant resistance appears at 1.3290, followed by 1.34. The pair could stop beforehand.
For more levels and lines, see the EUR/USD forecast. Here is a daily chart showing the clear breakout:
One of the reasons for the rally is progress in negotiations on the fiscal cliff: Both sides seemed to have made concessions and are getting closer.
However, the recent offer made by the White House was currently rejected by the Republicans, which presented a “Plan B” – minimal legislation to avoid higher taxes for Americans making up to 1 million dollars a year.
The White House also rejected this. Could these public rejection just serve as the last round of negotiations, made in order to conceal the concessions?
Both sides might want to show some toughness to their bases before presenting a deal which includes concessions.
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