EUR/USD: Brexit and stimulus have the answer to the next direction

EUR/USD has been hovering above 1.21 and Wednesday's 4-hour chart is pointing to a narrowing wedge. Traders are bracing for volatility, but where will it go to? Two sets of talks hold the key as FXStreet’s Analyst Yohay Elam notes.

Key quotes

“All eyes are on a dinner table in Brussels at 19:00 GMT – where European Commission President Ursula von der Leyen meets UK Prime Minister Boris Johnson. Further reports from the pre-summit talks will likely cause choppy trading before a full explosion once the meeting concludes. A significant move forward would boost the common currency while a collapse of talks would cause a breakdown.”

“US Treasury Secretay Steven Munchin said that 90% of the stimulus package details will be completed on Wednesday. However, it is always about the remaining 5% or 10%. Markets will not need to wait for a specific time to hear updates. The safe-haven dollar would fall if talks make progress and rise if they hit another wall.” 

“EUR/USD is trading in a narrowing triangle or wedge. Technical textbooks suggest that once the pair chooses a direction, it should trend strongly in that chosen path. Currently, EUR/USD is near the bottom end of the triangle. Break or bounce at support? The answer will come shortly.” 

“Support awaits at 1.21, which is the daily low, followed by 1.2080 and 1.2005. Resistance is at 1.2150, the daily high, followed by 1.2177 and 1.22.”