The currency market ended with robust gains on Thursday, backed by dollar weakness, and the EU planned to open up tourist destinations. Euro settled with gains for the third consecutive day on May 28. The common currency closed a percent higher against the dollar, with EURUSD ended at 1.1080 highest level since March 30. Tourism represents 10% of the European economy and creates 27 million jobs directly and indirectly across the region-sources. Investor sentiment was also improved after the European Commission (EC) unveiled plans for a 750 billion-euro ($826.5 billion) recovery fund.
Besides, the dollar index (KTM: USDX) drifted below its support level and settled at 98.30. The daily RSI and the oscillator are remaining bearish, 98.00 is the near-term critical support level. The 10-year bond yield 0.70% as compared with 0.68% at the close in the previous trading session.
EURUSD has managed to surpass its key moving average of 200-MA and its crucial hurdle at 1.1020. So, it may be heading towards 1.1145. EUR traders are likely to keep watch on next week’s ECB meeting.
Let’s look at the monthly scoreboard as we are on the last trading day for May. Among the G10 FX currencies, EUR outperforms the pack with 2.50% gains, followed by AUD and NZ with 2.30%.
Among EUR crosses, EURGBP leads the pack with 3.40% gains, followed by EURJPY.
- We expect the bank will cave in and further raise quantitative easing purchases under its PEPP program—we are penciling in an increase of €500 billion to a total of €1.25 trillion. While we welcomed the European Commission’s announcement this week of a fiscal proposal worth €750 billion to help the European Union countries finance the cost of the crisis, the fact that the ECB’s funds will probably only start to flow next year means that the ECB will need to do the heavy lifting on the policy front in 2020, according to Moody’s.
- Danske Bank: We expect the ECB to expand the PEPP envelope by EUR500bn into June 2021 at next week’s meeting. We do not expect new asset classes to be added at this stage. We also expect an extension of the EUR20bn/month ‘normal’ APP, but no additional APP envelope when the current EUR120bn ends in December this year. We do not expect an announcement on the potential PEPP reinvestment strategy next week.
Levels to watch:
EURUSD has managed to surpass its key moving average of 200-MA and its crucial hurdle at 1.1020. A decisive breakout above 1.1150 allows the EUR to outperform in June, aiming at 1.1220 and 1.1350.
Supports located at 1.1080, 1.1000, and 1.0860 levels.
We suggest maintaining a positive yet cautious approach as the EURUSD is close to the resistance level of 1.1150. The pair has risen 2.50% in five straight trading sessions and capped at 61.8 fibs.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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