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EURUSD Outlook After the Historic Recovery Fund Deal

The EURUSD pair wavered today as traders reacted to the breakthrough EU recovery deal passed in Brussels. The pair is trading at 1.1442, which is a bit lower than the intraday high of 1.1470.

EU leaders breakthrough

As you recall, the European Union Commission announced a large €750 billion rescue package in May this year. The commission said that the funds would go to countries to help them recover after the pandemic.

Immediately after the announcement, leaders in Austria, Netherlands, Sweden, and Denmark rejected its structure. They were opposed to a clause that said that most of these funds would be given out in the form of grants.

Earlier today, after lengthy deliberations, the two opposing sides agreed to the deal. In this deal, countries will receive €390 billion in form of grants and another €360 billion in form of low interest rate deal. At the same time, the leaders agreed to a €1.07 trillion seven-year budget for the bloc.

It will now be upon the European Commission to go to the debt market and borrow these funds. It is also upon the commission to come up with structures that will enable the funds to pay for themselves.

The EURUSD declined after the deal was announced because of what is known as “buy the rumour, sell the news” situation. This is when traders buy an asset hoping that a positive thing will happen. When it happens, they sell the asset as they book their profits.

In a statement, Angela Merkel said that the deal was setting the “financial foundations for the EU for the next seven years.” Analysts at ING said:

“One thing is for sure, after the ECB has been the only game in town for quite some time now, it looks like a second team has entered the game. That should take some of the pressure off of the ECB in the aftermath of this historical crisis. Probably even more if the second team was to improve its team play.”

EURUSD technical outlook

The EURUSD pair is trading at 1.1442. On the daily chart, this price is above the 50-day and 100-day exponential moving averages. The price is also above the Ichimoku cloud, which is usually seen as a bullish thing. Also, the EURUSD pair is below the important resistance level at 1.1495. Therefore, there is a possibility that the upward trend will continue as traders aim for this level.

On the flip side, a move below 1.1400 will invalidate this trend. This is an important psychological level that is also the highest level on June 11.

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EURUSD technical forecast

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