Hello, dear colleagues!
Yesterday, the currency market was dominated by risk sentiment, which put pressure on the US currency. The risk appetite was driven by the adoption of a large-scale economic recovery plan for the European Union, many of whose countries were significantly affected by COVID-19. Also, the risk sentiment of market participants was fueled by reports about an allegedly already developed and ready-to-use vaccine for a new type of coronavirus infection.
If you go back to ending a four-day summit of the countries of the EU, as issues regarding the adoption of the seven-year EU budget and the creation of a fund for economic recovery of the region after COVID-19 is extremely serious and a decision on the compromise were born as a result of long multi-format of negotiations, with the outcome that not all EU member states are fully satisfied.
Thus, Germany and France, which were the initiators of the creation of the mutual economic assistance fund, were not able to implement strict subsidies with respect for the principles of the right state by all countries. In this regard, French President Emmanuel Macron has been criticized by both left and right-wing radicals for sacrificing the interests of France and democratic values.
In turn, Hungarian Prime Minister Viktor Orban considers it a personal achievement to significantly soften the principle of financing countries affected by coronavirus with a strict link to their status as a right-wing state. As you know, the countries of Eastern Europe, which were part of the Warsaw Pact during the Soviet Union, periodically complain about their compliance with democratic values.
Another important point of the results of the 4-day EU summit was the provision of significant budget discounts to the most economical and Thrifty countries: Denmark, the Netherlands, Sweden and Austria. Only on such terms could they be persuaded to accept the EU's seven-year budget and not oppose the creation of an economic recovery fund.
Since all 27 EU states showed solidarity and reached an agreement at one of the most important summits in the history of the European Union, the European Commission will now be able to raise billions of euros on the capital markets on behalf of all EU countries, which will go to help the most affected states by COVID-19. Thus, Italy hopes to receive assistance in the amount of 210 billion euros, Spain is planned to provide 140 billion, and Greece - 72 billion euros. At the same time, the ideological founders of the EU economic recovery fund will also not be left empty-handed. Germany, like the above-mentioned Thrifty or tight-fisted four, receives significant budget discounts, and France will be given assistance in the amount of 40 billion euros. In the end, by and large, everyone got their piece of the pie and, in principle, were satisfied with it.
Daily
As you may remember, yesterday's review suggested two main scenarios. Either market participants have not yet "woken up" and will later play back the fact of reaching a compromise at the EU summit or this factor has already been taken into account in the price of the single currency and the principle of "buy on rumors, sell on facts" may work. The market gave its preference to the first scenario, and yesterday's trading of the main currency pair ended with an impressive growth. At the same time, the closing price of Tuesday's session was at 1.1525, which is higher than the resistance of sellers at 1.1494 and the psychological mark of 1.1500. However, despite the strong bullish sentiment and the current weakness of the US currency, it is not necessary to say that the 1.1500 breakout can already be clearly considered true. The level is too strong, important, and difficult to pass.
Nevertheless, the euro/dollar pair is still bullish at the time of writing and is trading near 1.1540. Despite the strong growth factor, buying at the peak of the market is quite risky. In addition, there is a high probability of a corrective pullback to the 1.1500 area. Thus, the main trading idea for EUR/USD is to buy after short-term corrective pullbacks to the price zone of 1.1515-1.1495.
If there are reversal patterns of candle analysis near the current prices (1.1540-1.1550), those who wish can sell with goals in the area of 1.1515-1.1500. However, you should understand that this position is against the trend, so you need to take into account all the risks and be sure to use a protective stop loss order.
I wish you successful and profitable trading!