The EUR/USD currency pair extended its previous day bullish moves and surged to 1.1547, an 18-month high, and now targets the 2019 peak at 1.1570 on the report that the European Union has reached a highly-anticipated deal on the EUR 750 billion coronavirus recovery fund.
However, the gains in currency pair could be attributed to the modest upbeat trading sentiment backed by the vaccine hopes and hopes of U.S. fiscal stimulus, which undermined the U.S. dollar and contributed to the currency pair gains. Moreover, the shared currency also got support from the positive comments of European Central Bank's (ECB) Vice President Luis de Guindos that the GDP contraction in the second quarter of the year will be smaller than initially expected. At the moment, the EUR/USD currency pair is currently trading at 1.1535 and consolidating in the range between 1.1520 - 1.1547.
As we all well aware that the European Union (E.U.) leaders agreed on late Monday for a possible €1.8 trillion ($2.06 trillion) coronavirus spending package but with some changes in the proposal that was meant to reverse the coronavirus-induced slump in the European economies. This news boosted the risk-on market sentiment and strengthened the bid tone around shard currency. An additional boost on the risk sentiment was derived from negotiations for a second stimulus package in the U.S. after the sustained rise in the pandemic cases from the U.S., which increased hopes of America's Phase 4 stimulus.
Considering the current virus situation in the U.S., the U.S. Treasury Secretary Steve Mnuchin recently offered a clear timeline about the stimulus package that when it is expected to launch. The Trump administration senior suggested that the aid package be passed in the current month during his appearance on the early Wednesday morning in Asia.
Apart from this, the currency pair also got additional support from the risk-on market sentiment. The positive tone around the global equity markets undermined demand for the safe-haven U.S. dollar and extended some support to the EUR/USD currency pair. However, the risk-on market sentiment was supported by the vaccine's success, which overshadowed the fears of the ever-increasing numbers of the virus.
Whereas, the Wall Street marked mixed closing with Nasdaq giving a part of the early-week gains. Moreover, the U.S. 10-year Treasury yields also dropped 1.5 basis points (bps) to 0.605% while the S&P 500 Futures stays mildly positive around 3,250 at the writing time.
As in result, the broad-based U.S. dollar flashed red and edged lower on the day. However, the losses in the U.S. dollar could be attributed to the uptick in the U.S. stock futures and kept the currency pair higher.
The pair may take cues from the U.S. Existing Home Sales data for June, scheduled for release at 14:00 GMT and ECB's De Guindos Speech at 15:00 GMT. The market traders will keep their eyes on USD price dynamics and coronavirus headlines, which could play a key role in influencing the intraday momentum.
Daily Support and Resistance
S1 1.1265
S2 1.1382
S3 1.1457
Pivot Point 1.1499
R1 1.1574
R2 1.1615
R3 1.1732
The EUR/USD seems to close a handing man candlesticks pattern famous for driving bearish correction. Since this pattern is being formed at 1.1530 level, we can expect a bearish correction in the EUR/USD pair. At the same level, the upward channel is also providing resistance to the EUR/USD pair. Below 1.1540, the EUR/USD has the potential to drop until 1.1460 level, the support level, which is extended by an upward channel and can be seen in the chart above. The RSI is in the overbought zone and confirms the idea of capturing a bearish correction below 1.1545 level. Good luck!