The EURUSD is off to a strong start this week. It jumped on Monday right from the opening and never looked back all the way to 1.1790. The bid behind the EURUSD pair and the Euro pairs, in general, comes after the European Commission (E.C.) said that the SURE bonds would be social bonds – a decision viewed by many as a game-changer for the European fixed income market.
What Is SURE?
SURE stands for Support to mitigate Unemployment Risks in an Emergency – a temporary tool to use in a crisis. It supports short-time loan schemes in place in each country and the E.C. proposed package to start with is EUR100 billion.
Over the weekend, the E.C. announced that the bonds are social and released a framework designed to assure investors that the final objective of these bonds is as such.
The EU SURE starts with a dual-tranche (i.e., 10y and 20y), and the offer will be extremely well received by investors. Moreover, the ECB can buy them also in the secondary market, as per their eligibility.
In the meantime, Spain, Italy, and some other countries hinted that at the time being they have an interest only on the grants part of the funds. The reason is that by taking the loans in the joint offering comes with more supervision from Brussels – something many states are not keen to have.
EURUSD Technical Analysis
EURUSD’s vertical advance this week opens the possibility of a pennant formation. In such a pattern, after a quick and aggressive consolidation, the market breaks higher. A pennant’s measured move equals the distance traveled prior to the triangular consolidation. In EURUSD‘s case, the pennant forms against resistance.
Bulls may want to buy a break above the descending trendline (resistance) and target the measured move while having a stop-loss order at the lowest point in the triangular pattern.