EURUSD: The assistance and recovery plan for the Eurozone is postponed until July
June 22, 2020 3:21 pm
The euro collapsed on Friday against the US dollar, as buyers of risky assets did not find positive moments after a video conference of EU leaders, who once again agreed to meet at the end of July to try to agree on a recovery plan and financial assistance of billions of euros. We are talking about a plan proposed by the European Commission for the amount of 750 billion, however, this proposal is not supported by the majority, as there are still quite large differences in how to create this package.
EU chief negotiator Michel Barnier said on Friday that EU leaders will meet in mid-July to agree on a recovery plan and budget. According to him, there is a consensus on some points of the recovery plan, however, the differences remain quite large. The European Commission’s plan involves raising money in the debt and financial markets, which will then be distributed among the most affected member countries. And as you may remember, these countries are usually Italy and Spain. As for the budget, its approval raises far fewer questions. A budget of 1.1 trillion euros will come into effect next year. Some experts believe that one meeting in July is not enough, and at least two summits should be held next month to agree on such decisions.
This development puts pressure on the European currency since without a new aid plan, it is unlikely that the economic recovery of the most affected EU countries from the coronavirus will be as rapid as in countries with stronger economies. This will create an even greater imbalance and lead to a gap in the spreads and yields of these countries’ government bonds, which may ultimately affect the investment rating and increase divisions within the EU.
Also on Friday, it was reported that the Federal Reserve is planning to analyze banks’ readiness for scenarios with COVID-19 using stress tests, the results of which will be published on June 25.
During his speech, US Federal Reserve Chairman Jerome Powell once again repeated practically everything he said throughout the week, saying that the economic shock caused by the coronavirus pandemic opened up those problem areas in the economy that had not previously caused alarm. Powell also noted that the economy will recover, however, it will take more time and effort since the pandemic has “opened up” long-term economic inequalities.
As for the technical picture of the euro/dollar pair, it is not quite correct to talk about the pace of recovery of the European currency in the near future, although it suggests a correction after the downward trend formed on June 11 this year. To do this, buyers of risky assets need to overcome the resistance of 1.1255, since only then can we expect a larger growth in the area of the highs of 1.1300 and 1.1350. If the bulls do not manage to cope with this task at the beginning of the week, it is likely that there will be a smooth return to the lows of this week, the breakdown of which will open a direct path for the trading instrument to the lows of 1.1105 and 1.1035.
The Canadian dollar remained trading in a side channel, ignoring the April data on the sharp decline in retail sales in Canada in April this year, which was the strongest in the history of this indicator. Social distancing and quarantine measures led to the closure of many stores and affected the index. According to the Bureau of Statistics of Canada, retail sales in April fell by 26.4% compared to March and amounted to 34.72 billion Canadian dollars.
As for the technical picture of the USDCAD pair, trading in the side channel of 1.3515-1.3615 may continue this week, as many traders expect a downward correction in oil, which necessarily puts pressure on the Canadian dollar. A break in the resistance of 1.3615 will lead to a new wave of growth of the trading instrument in the area of highs of 1.3735 and 1.3825.
The material has been provided by InstaForex Company – www.instaforex.com
The euro collapsed on Friday against the US dollar, as buyers of risky assets did not find positive moments after a video conference of EU leaders, who once again agreed to meet at the end of July to try to agree on a recovery plan and financial assistance of billions of euros. We are talking about a plan proposed by the European Commission for the amount of 750 billion, however, this proposal is not supported by the majority, as there are still quite large differences in how to create this package.
EU chief negotiator Michel Barnier said on Friday that EU leaders will meet in mid-July to agree on a recovery plan and budget. According to him, there is a consensus on some points of the recovery plan, however, the differences remain quite large. The European Commission’s plan involves raising money in the debt and financial markets, which will then be distributed among the most affected member countries. And as you may remember, these countries are usually Italy and Spain. As for the budget, its approval raises far fewer questions. A budget of 1.1 trillion euros will come into effect next year. Some experts believe that one meeting in July is not enough, and at least two summits should be held next month to agree on such decisions.
This development puts pressure on the European currency since without a new aid plan, it is unlikely that the economic recovery of the most affected EU countries from the coronavirus will be as rapid as in countries with stronger economies. This will create an even greater imbalance and lead to a gap in the spreads and yields of these countries’ government bonds, which may ultimately affect the investment rating and increase divisions within the EU.
Also on Friday, it was reported that the Federal Reserve is planning to analyze banks’ readiness for scenarios with COVID-19 using stress tests, the results of which will be published on June 25.
During his speech, US Federal Reserve Chairman Jerome Powell once again repeated practically everything he said throughout the week, saying that the economic shock caused by the coronavirus pandemic opened up those problem areas in the economy that had not previously caused alarm. Powell also noted that the economy will recover, however, it will take more time and effort since the pandemic has “opened up” long-term economic inequalities.
As for the technical picture of the euro/dollar pair, it is not quite correct to talk about the pace of recovery of the European currency in the near future, although it suggests a correction after the downward trend formed on June 11 this year. To do this, buyers of risky assets need to overcome the resistance of 1.1255, since only then can we expect a larger growth in the area of the highs of 1.1300 and 1.1350. If the bulls do not manage to cope with this task at the beginning of the week, it is likely that there will be a smooth return to the lows of this week, the breakdown of which will open a direct path for the trading instrument to the lows of 1.1105 and 1.1035.
The Canadian dollar remained trading in a side channel, ignoring the April data on the sharp decline in retail sales in Canada in April this year, which was the strongest in the history of this indicator. Social distancing and quarantine measures led to the closure of many stores and affected the index. According to the Bureau of Statistics of Canada, retail sales in April fell by 26.4% compared to March and amounted to 34.72 billion Canadian dollars.
As for the technical picture of the USDCAD pair, trading in the side channel of 1.3515-1.3615 may continue this week, as many traders expect a downward correction in oil, which necessarily puts pressure on the Canadian dollar. A break in the resistance of 1.3615 will lead to a new wave of growth of the trading instrument in the area of highs of 1.3735 and 1.3825.
The material has been provided by InstaForex Company – www.instaforex.com
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