The common currency EUR gained on Monday. By the end of the day, the EURUSD was up 70 pips higher or 0.50% at 1.0300. Last week there has been a shift in EURUSD, as the price action painted solid support at 1.1185.

Looking ahead to the 2H 2020, it’s shaping up to potentially be just as eventful as the first. Euro bulls will be keeping a close eye on the growth stories between the E.A. and the U.S.

Last night in the U.S., two U.S. services PMIs were hit the wires. ISM survey of the services sector has delivered a strong comeback after two months of negative readings whereas

Final June Markit services PMI signaled a notably softer rate of contraction in business activity. Economic activity in the non-manufacturing sector grew in June after two consecutive months of contraction, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM.

  • US June Non-manufacturing ISM registered at 57.1%, 11.7% higher than the May reading of 45.4% led by surging new orders 61.6% and Business Activity Index at 66.0%.
  • Activity Index registered 47.9 at the end of the second quarter, up significantly from 37.5 in May and above the earlier released ‘flash’ figure of 46.7, the IHS Markit Services PMI report said.

The economic news from the other side of the Atlantic Ocean remains upbeat, led by Germany factory orders and EZ May retail sales.

Since the European Council agrees to start lifting travel restrictions for residents for 1 July, as many Euro Area members are heavily reliant on tourism. On 30 June 2020, the Council adopted a recommendation on the gradual lifting of the temporary restrictions on non-essential travel into the E.U.

Starting from 1 July 2020, member states should start lifting the travel restrictions at the external borders for residents of the following third countries: Algeria, Australia, Canada, Georgia, Japan, Montenegro, Morocco, New Zealand, Rwanda, Serbia, South Korea, Thailand, Tunisia, Uruguay and China, the latter subject to confirmation of reciprocity, the E.C. said in a report last week.

The recovery pattern between E.A. and the U.S. lead us to the bullish EUR side, and the E.U. recovery fund aimed to support the common currency in the coming months.

On 27 May 2020, the E.C. presented its proposal for the recovery plan, including a revised long-term E.U. budget of €1 100 billion for 2021-2027 and a temporary reinforcement of €750 billion (Next Generation E.U.). France and Germany’s 500 billion-euro fund and the ECB substantially lifting the size of pandemic Q.E. are the critical drivers to euro currency since May. We count these mega bullish factors in the coming months.

On 19 June, European policymakers failed to reach the recovery fund’s agreement. We expect the deal will seal in July as the policymakers meet again. So, July is the critical month for the EUR. We forecasted a target of 1.17 in the medium term, and we are confident about Europe’s recovery.

Data review: 

  • Euro area annual inflation up to 0.3%
  • Final E.Z. Manufacturing PMI at 47.4 in June (Flash: 46.9, May Final: 39.4)
  • German’s Final Manufacturing PMI at 47.3, up from 32.6 in May.
  • Final Eurozone Composite Output Index at 48.5 (Flash: 47.5, May Final: 31.9)
  • Final Eurozone Services Business Activity Index at 48.3 (Flash: 47.3, May Final: 30.5).
  • German factory orders grew 10% in May compared with April.

Data preview: It will be quiet in terms of market-moving data releases, and that will leave investors’ main focus on recovery-related headlines around the world. 

E.C.’s meeting: E.U. leaders will meet physically in Brussels to discuss the recovery plan to respond to the COVID-19 crisis and a new long-term E.U. budget 17-18 July.

 TECHNICAL OVERVIEW

 Golden Crossover suggests buying opportunities in EURUSD. A close above 1.1500 indicates a new wave higher towards 1.17 and 1.20.

 The bias for the EUR has shifted towards appreciation, given the technical Golden Crossover and the risk-on sentiment. The positive data sets supported the EUR and weighed on the dollar; as a result, EURUSD pushed towards 1.1350 overnight but failed to close above.

Targets for our long EURCHF, long EURGBP, and long EURUSD trades were revised marginally upwards due to the new E.U. momentum. From here on, EUR could outperform against CHF, JPY, and USD compared to the other crosses.

EURCHF traced out a triple bottom at 1.06; it’s 100, M.A. We expect to trade in the 1.0700-1.0600 rage in the short term, a bullish break out looms. Interestingly in Commodities Silver-spotted with the Golden Crossover bullish pattern.

Technically, EURSUD must continue to hold 1.1170-1.1180 zone to get the stability to witness an up move towards early June high of 1.1500. If the price moves up, the key resistance level to watch out are 1.1350 1.1425 and 1.1500.

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

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