EURUSD extend gains after yesterday’s sharp gains as the common currency gains momentum above the 50-day moving average. Yesterday, President Emmanuel Macron and German Chancellor Angela Merkel announced a 500 billion euro recovery fund that would offer grants to EU countries and sectors hit hardest by the coronavirus outbreak.
The money from this relief fund, allocated to a country, would be a grant, and not a loan. That is very important as it will not increase the debts of the already battered economies.
The European Commission would borrow money from the financial markets to fund the €500 billion package and distribute it to EU governments through the EU budget. The European Commission is scheduled May 27 to come forward with its recovery proposal. Now the recovery fund must be approved by all EU governments.
On the data front, the European Monetary Union Construction Output plunged to -15.4% in March from previous -0.9%. The monthly reading for the Construction Output came in at -14.1% in March from -1.51% in February.
Mixed news came out of Germany as the ZEW Survey – Current Situation came in at -93.5, below the forecasts of -88 in May. The ZEW Economic Sentiment survey came in at 51 topping the expectations of 32.
EURUSD is 0.36% higher at 1.0954, at two-week highs as the pair boosted by the positive developments in the shared relief package. EURUSD gains traction above the 50-day moving average and a test of the next resistance at the 100-day moving average is possible.
On the upside, the initial resistance for EURUSD stands at 1.0956 the daily high. If the pair breaks that minor resistance then the next target is at 1.0971 the 100-day moving average, while a credible break above might the way for a test of the 200-day moving average at 1.1016.
On the other hand, first support for the EURUSD stands at 1.0902 the daily low; the 50-day moving average also stands at 10898. Next support level would be met at 1.08 the low from yesterday’s trading session. If the EURUSD breaks that support level, then the next target for sellers is at 1.0771 the low from May 14.