The Euro came to life, rebounding strongly from its recent base around the 1.08 level to an overnight high at 1.09272 before settling at 1.0915 at the New York close. The shared currency was boosted by the news that German Chancellor Angela Merkle and French President Emmanuel Macron had agreed to a EUR 500 billions coronavirus recovery fund to aid EU member states. Broad-based US Dollar weakness also buoyed the Euro. The recovery proposal still needs support from the Netherlands and requires legislative approval. This follows the failure of the EU Summit to agree on a potential stimulus plan held late last month.
EUR/USD has immediate resistance at 1.0930 followed by 1.0970 and 1.1000 (strong). Immediate support can be found at 1.0880 followed by 1.0850 and 1.0810. The buying support at 1.0800 was strong considering how the level held and the strong bounce overnight.
Overnight, Germany’s 10-year Bund yield was up 7 basis points to -0.47%, and while up, did not match that of the US 10-year rate (up 9 BP). Let’s not forget that in last week’s Commitment of Traders report net speculative Euro long bets (+EUR 76,299 contracts) were also at 87% of yearly highs. This will prevent any meaningful gains above the 1.1000 level. We look at the latest COT report, due tomorrow.
Look for a likely trading range today of 1.0850-1.0950. Prefer to sell rallies.