Having been down more than 5% at one point this year, the common currency has recovered much of its losses and is now close to 17 months high. The EURUSD is up 2.50% in 2020 and trading above all the key moving averages daily and Weekly charts.

 Improvement in risk appetite: Over the weekend, market sentiment was further improved on the latest vaccine hopes and the latest headlines on the EU Recovery Fund.

The FT reported that a coronavirus vaccine being developed by Oxford University and AstraZeneca had shown promise in an early trial. The vaccine generated “robust immune responses” and was “tolerated” among all patients in the study, AstraZeneca said on Monday.

 EU Summit: Trading for week 30 started again on a positive note even though the EU leaders have failed to agree on the EU Recovery fund. 

  • Paul Donovan at UBS said, “This really should not be a surprise. Every EU summit of any importance always drags on longer than scheduled. It seems that EU leaders are only capable of agreeing on anything when massively sleep-deprived. The anti-fund/frugal faction has agreed to the principle of grants being part of the recovery fund.”
  • At NAB, Rodrigo Catril said, “Leaders have reportedly agreed to €390b of the €750b fund being allocated to grants to vulnerable countries, with the remainder being low-interest rate loans. The countries now need to agree on other issues such as climate change targets and a proposal to link payments to countries following the ‘rule of law,’ which Poland and Hungary are opposed to.”

 Data review: 

The ZEW Indicator of Economic Sentiment stands at 59.3 points, according to the official release. Expectations are now at 59.3 points, 4.1 points lower than in the previous month. The assessment of the economic situation in Germany has improved slightly for the second time since January 2020.

At last week’s meeting, the Governing Council for the ECB decided the following decisions:

  • The interest rate on the main refinancing operations and the marginal lending facility’s interest rates and the deposit facility will remain unchanged at 0.00%, 0.25%, and -0.50%, respectively.
  • The Governing Council will continue its purchases under the pandemic emergency purchase program (PEPP) with a total envelope of €1,350 billion.
  • Net purchases under the asset purchase program (APP) will continue at a monthly pace of €20 billion and the purchases under the additional €120 billion temporary envelope until the end of the year.

 Data preview: We will see July Consumer confidence (preliminary) on Thursday and Manufacturing and Services PMI readings on Friday. And we also focus on Finland’s debt rating by Moody’s and Greece’s debt rating by Fitch on Friday. 

ING: Both manufacturing and services surveys are expected to rise, with the July PMI Service to move back in the expansionary territory (above 50) for the first time since the Covid-19 pandemic hit Europe.

TECHNICAL OVERVIEW

Last week EURUSD has taken support from the line of polarity located around 1.1371 levels and bounced back towards 1.1500, March 2020 high, suggesting that bulls are not ready to give up, and prices are in a firm hand. Simultaneously, higher low and higher pattern and the A-B-C structure are also showing a conductive scenario for the coming sessions.

On top of these, EURUSD’s 50MA has crossed over 200MA formed a Golden Crossover pattern that suggests prices are ready to travel North pole towards August 2015 high at 1.1700+ and 1.1850 it’s 100MA (monthly). However, the traders need to be cautious if a decisive break down below 1.1100 comes, which will be an early sign of near-term trend reversal.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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