EUR/USD. Main focus on the online meeting of EU leaders

The euro-dollar pair is trading at the bottom of the eighth figure, once again falling below the 1.0850 mark. This price barrier is not the first time that EUR/USD bears have broken over the past two weeks – but all attempts to go below fail. However, according to today's results, the pair will either settle in the area of the seventh figure, or return to the ninth. And it's not just the macroeconomic statistics that will be published today in Europe and the US – the market is primarily waiting for the results of the online summit of EU leaders. The debate is expected to be heated, and the results are unpredictable, despite the optimistic assessments of most experts.

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During the current week, the EUR/USD pair showed a sluggish bearish mood due to the general strengthening of the US currency. The dollar index is still staying above the 100-point value against the background of recent events in the oil market. But, first, oil quotes have slightly recovered (especially after Trump ordered the Navy commander to shoot at Iranian vessels if necessary), and secondly, the dollar itself is under pressure from an ambiguous fundamental background. Therefore, dollar bulls could not organize a rally – they showed themselves more clearly in pairs with commodity currencies, but in other pairs they only indicated their presence. For example, the dollar was able to strengthen by only 70-80 points against the euro.

Further downward dynamics depends on two factors: first, the overall level of anti-risk sentiment in the market, and second, the results of today's online summit of the EU countries.

As for the first point, it is worth noting one interesting fact – the market is no longer responding to the daily increase in the number of Covid-19 cases, focusing only on the economic consequences of the global lockdown. For example, according to the latest data, 79,959 coronavirus infections were diagnosed in the world - this is 3,000 more cases than on April 21. Such dynamics were recorded after the head of the World Health Organization Tedros Aden Gebreyesus stated that a pandemic of the novel coronavirus is accelerating. But, as we can see, the protective assets of the currency market reacted poorly to this news, although a few weeks ago such news would have provoked strong volatility. While now traders are more interested in news about the development of a vaccine or drug against Covid-19. Scientists from around the world (in particular, the UK, China, Turkey, Australia and the United States) report some progress in this direction, and this fact to some extent reduces concerns about the further spread of the virus. Due to these circumstances, the protective assets of the currency market behave quite passively. The dollar included, around which there is no longer the past hype.

Therefore, the euro will be the main engine of the medium-term movement of the EUR/USD. The results of today's summit of EU leaders will either send the pair into a knockdown, or help return it to the area of the ninth figure.

Let me remind you that not so long ago, members of the Eurogroup agreed on a package of assistance for 540 billion euros. Today, European leaders will try to agree on a recovery plan worth 2.2 trillion euros for the eurozone economy. And it should be noted here that the agreement that was reached earlier does not mention the use of joint debt to finance recovery, that is, the notorious crown bonds.

Representatives of the southern countries of Europe, Italy, France and Spain, strongly insisted on the introduction of crown bonds. But representatives of northern Europe - Germany, the Netherlands, Finland, Estonia were categorically against this idea. As you can see, according to the results of this confrontation, the north prevailed over the south. This means that today EU leaders will have complex discussions on this issue.

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On the eve of the second round of negotiations, Italian Prime Minister Giuseppe Conte made a rather harsh statement - according to him, the European integration project will be "threatened" if the EU countries do not agree on an economic response to the coronavirus pandemic. At the same time, he zealously defends the idea of introducing crown bonds - at the first online summit, he very emotionally discussed this with his colleagues, but he could not convince them. Given this disposition, it can be assumed that the next online summit will not be a simple formality: representatives of the south will probably raise the issue of crown bonds again, which they have been insisting for a long time. According to available information, even the term crown bonds was excluded from the documents in order to avoid unnecessary irritation.

In other words, the sharp differences between the EU's north and south can put serious pressure on the euro. If European leaders do not approve of the pandemic crisis and recovery roadmap today, then not only will the EUR/USD pair test the seventh figure, but it could also go down to the support level of 1.0730 (the lower line of the Bollinger Bands indicator on the daily chart). A correctional pullback to 1.0910 is possible if today's dialogue ends on a major note - the middle line of Bollinger Bands and the lines of Tenkan-sen and Kijun-sen (on D1) are connected in this price area.

The material has been provided by InstaForex Company - www.instaforex.com