It’s been a quiet start to the week for EUR/USD, with only second-tier releases out of the eurozone and no events in the US. Ordinarily, investors would focus on upcoming fundamental releases, but the markets are glued to Brussels, where EU leaders are gathered. The two-day summit has been extended to a fourth day, as EU members are reportedly close to reaching an agreement on the massive EU pandemic recovery fund, which totals EUR 750 billion. Given the severe economic conditions facing the EU, there is considerable pressure on leaders to sign on to a deal as to how to allocate these funds.
The main stumbling bloc is based on a north-south divide. The ‘frugal four’ EU members (Austria, the Netherlands, Sweden and Denmark) want a smaller aid package and are demanding that most of the funds be in the form of loans rather than grants. The “club Med’ members, such as Italy, France and Greece, say that they desperately need the aid as grants. As expected, the talks have been difficult and at one point looked like they were doomed to failure. However, the talks are scheduled to continue later on Monday. If the leaders can reach an agreement, we could see the euro respond with gains and push above the 1.15 mark.
EUR/USD touched a high of 1.1467 in the Asian session, its highest level since March 2. The pair is currently trading at 1.1443, up 0.13% on the day.
- 1.1454 is an immediate resistance line, followed by 1.1482
- 1.1388 is providing support. Below, we find support at 1.1350
- The 10-day MA has provided support since July 7. Currently, it is at 1.1360