EUR/USD on The Upside After Historic EU Deal on Pandemic Recovery
After an intense and long five-day meeting, European leaders finally reached a deal on a stimulus plan to fight against the economic impact of the COVID-19 in their countries. The Euro initially traded lower, but now it is adding gains for the third day in a row against the US dollar as it is reaching highs since March this year.
The new fiscal stimulus opens the European Commission's path to raise billions of euros on capital markets. In other words, the European Union will have some kind of Eurobonds for the first time in its history.
All of this is because as the official document says, the recovery requires out of the box measures and solidarity between the country members.
We are slowly exiting the acute health crisis. While utmost vigilance is still required on the sanitary situation, the emphasis is now shifting to mitigating the socio-economic damage, this requires an unprecedented effort and an innovative approach, fostering convergence, resilience and transformation in the European Union.
In that framework, the European Commission will be able to raise 750 billion euros from capital markets. From that, they will distribute 390 billion euros in the form of grants, lower than the previous 500 billion asked by France and Germany back in May.
The EU also said that their next budget would sum around 1.074 trillion euros, and it will fund initiatives between 2021 and 2027.
France President Emmanuel Macron said that the "recovery fund will help us to almost double the European budget for the years to come."
Finally, the leaders agreed that 30% of expenditures from the recovery fund should address climate concerns. Something in line with the European Union target to become climate neutral by 2050.
EUR/USD Ready to Overcome 2020 Highs
The euro is trading sharply higher on July 21 as investors welcome the European Union deal and news from potential COVID-19 vaccines and reopening plans.
Initially, EUR/USD reacted somehow negatively to the news as some profit taking was conducted. After recovering the 1.1450 area, the pair is now trading near to highs since March 9 at 1.1495, which is the high of 2020.
Currently, EUR/USD is pricing at 1.1490, 0.37 percent positive on the day. The chart looks bullish with MACD and RSI favoring the upside and moving averages aligned to the upside.
A break above 1.1500 would open the door to the 1.1565 crucial area. Then, the 1.1700 would be the next significant level.
To the downside, any rejection and close below the 1.1500 would maintain the downside potential open. In any case, the key is the 1.1450, a close above that level would give bulls the reason to bet more on the upside.
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