We had a cheerful start for the week at 1.1780, marking the highest level since September 2018.

The unstoppable EUR stretched its winning streak to an incredible 10.95%, the longest rally since 2015.

 Set of 6th straight weeks of rising: The EURUSD has been running Northward for six straight weeks. Last time the run lasted for six weeks between Feb 2014-Mar 2014 and seven weeks between Dec 2017-Jan 2018. On both occasions, the price made a top at the end of the run.

Here are EURUSD’s longest winning streaks:

  • Oct 2008-Dec 2008: 19.70%
  • May 2010-Aug 2010: 12.20%
  • Aug 2010-August 2010: 13.55%
  • Jan 2011-April 2011: 16.00%
  • March 2015-August 2015: 11.95%
  • From Mar 2020: 10.95% and counting

In continuation of our last week’s report, our desired level of 1.1700 has now been met and waiting for the final move.

There is multiple technical observation that coincides around it; EUR will have a daunting task in front of them. The price trades just shy of the long-term descending trendline (12 years), and previous tops spread between 1.1815-1.1850 (June-Sep 2018).

As we step into the month-end, our eyes would be on a few critical levels. On the upside, 1.1815-1.1850 is the range to watch out for, whereas 1.1490 has now become key support. Besides, the dollar index is approaching key support level 93.00-92.80. FX positioning, Market sentiment, and the better than euro economic data points are the key drivers to the EUR. A V-shaped trend is currently emerging for the consumer climate in Germany.

Buy on dip strategy should be continued until the market holds 1.1170. The A-B-C structure suggests 1.1950-1.2000 is coming. Buy the dip

 Bond market: The UST 10yileds up 3bps on Monday to 0.62%, resist falling below march and April lows of 0.54 and 0.58, respectively. And German 10-year yield up by 5bps to -0.5%. EZ bonds continue to outperform post last week’s EU recovery fund deal.

 News flow had been relatively upbeat last week. Economic expectations have once again gained slightly according to the official data.

Business activity across the eurozone rose for the first time since February, according to provisional PMI survey data, growing at the sharpest rate for just over two years as economies continued to reopen after lockdowns implemented to prevent the spread of the coronavirus disease 2019 (COVID-19), IHS Markit reported.

  • GfK has forecast a figure of -0.3 points for August 2020, 9 points higher than its level in July of this year (revised to -9.4 points).
  • In July 2020, the flash estimate of the consumer confidence indicator remained broadly stable in the euro area (0.3 points down) and was unchanged in the EU. At −15.0 points (euro area) and −15.6 points (EU), both indicators remain well below their long-term averages of −11.1 (euro area) and −10.5 (EU), according to the official release.
  • Flash Germany Manufacturing PMI at 50.0 (Jun: 45.2). 19-month high.
  • Flash Germany Services PMI Activity Index at 56.7 (Jun: 47.3). 30-month high.
  • Flash Eurozone Manufacturing PMI at 51.1 (47.4 in June). 19-month high.
  • Flash Eurozone Services PMI Activity Index at 55.1 (48.3 in June). 25-month high.
  • The annual growth rate of the broad monetary aggregate M3 increased to 9.2% in June 2020 from 8.9% in May, averaging 8.8% in the three months.

 Data preview: We will see July’s economic confidence (Thu) and 2Q GDP (Fri). The US Fed is meeting this week, and decisions will be announced on Wednesday.

 ING: We remain in the view that there is still very little interest within the FOMC to display any hawkish tilt in their message, especially given fresh lockdown measures and concerning jobs data. A reiteration of the Bank’s accommodative stance appears nothing less than what markets – and the dollar – are pricing in, so we suspect a somewhat limited impact from the meeting.

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

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