EURUSD – The real deal?

In our last write up on the EURUSD in late April we were downbeat, concerned that the EU had failed to address the COVID-19 economic downturn, handcuffed by political bickering and debt constraints. In an update on EURCHF and the EURUSD here on May 20th, we highlighted the positive surprise coming from a joint press conference where German Chancellor Angela Merkel and French President Emmanuel Macron proposed a €500bn Recovery Fund to support the regions worst hit by COVID-19 via grants rather than loans.

In our last write up on the EURUSD in late April we were downbeat, concerned that the EU had failed to address the COVID-19 economic downturn, handcuffed by political bickering and debt constraints.  

In an update on EURCHF and the EURUSD here on May 20th, we highlighted the positive surprise coming from a joint press conference where German Chancellor Angela Merkel and French President Emmanuel Macron proposed a €500bn Recovery Fund to support the regions worst hit by COVID-19 via grants rather than loans.

Last Wednesday, building on the Franco-German proposal, the European Commission proposed a new €750 billion recovery fund dubbed “Next Generation EU”. If ratified by all 27 EU member states it greatly increases the prospects of recovery across the European region. Equally important, it would consolidate the region's first step towards fiscal union.  

Further reinforcing the positive sentiment, Germany the largest member of the EU enjoyed a run of better than expected economic data last week, including retail sales and the IFO survey, driven by a strong rebound in future expectations. Supporting the uplift in data, Germany has been able to relax social distancing measures faster than other European countries.

All of which has proved supportive of the Euro against the USD, helping the EURUSD to a 1.86% gain last week, and a daily close above 1.1100 for the first time since late March.

The EURUSD’s rally has been in line with our expectations following the bottoming pattern that formed at the 1.0765 area (outlined in recent video updates). However, from here things turn more critical as the EURUSD attempts to consolidate its break from out of the trend channel, which has largely contained the EURUSD for the better part of 18 months.  

To this effect, I am watching for a break and daily close above 1.1150 to confirm the break out and that the next leg higher is underway towards year to date highs 1.1500 area. In this instance, consider opening a long EURUSD trade with a stop loss placed 25 pips below the 200 day moving average, currently at 1.1010.

EURUSD – The real deal?

Source Tradingview. The figures stated areas of the 1st of June 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.