The Euro held on to its gains above 1.0900, closing a modest 0.08% higher to 1.0925 from 1.0915 yesterday. EUR/USD traded to 1.0976, 24 pips shy of the 1.10 resistance level. Yesterday’s report of an agreement in principle of a Euro 500 billion recovery fund for EU nations by French President Emmanuel Macron and German Chancellor Angela Merkel boosted the shared currency above 1.09. The Euro had been in consolidation mode basically between 1.0770 and 1.0900 for almost 3 weeks now. The break above 1.0900 has some excited that a turn in the tide may be in the making.

While that is possible, our view is that it is unlikely for the following reasons. The first is the market positioning. The latest Commitment of Trader report (week ended May 12) saw speculative long Euro bets increase modestly to +EUR 78,140 from +EUR 76,299. The total amount represents 90% for the year’s biggest total. The Franco German recovery fund agreement still needs to be agreed by all member nations. French Finance Minister Bruno Le Maire said that the EU recovery fund probably will not be available until 2021.

EUR/USD has immediate resistance at 1.0975 followed by 1.1005. Immediate support can be found at 1.0900 followed by 1.0870. Prefer to sell rallies in a likely range today of 1.0870-1.0970.