Euro jumps after EU leaders ink a recovery fund deal

The euro rose during the Asian session as traders reacted to marathon talks in Brussels about an EU recovery fund. According to the Financial Times, the leaders are close to striking a deal that will see the European Commission borrowing billions for the first time in history. The package will centre on a €390 billion grant package, which is smaller than the €500 billion that Berlin had proposed. The leaders are also close to signing a €1.07 trillion seven-year budget. 

The Australian dollar rose today as traders digested the latest Reserve Bank of Australia (RBA) minutes. In the minutes, the bank explained its rationale for leaving interest rates unchanged in the previous meeting. The members noted that household consumption had fallen by about 1% in the first quarter and was expected to worsen in the second quarter. They attributed this to a curb on international travel. The Aussie also rose after Governor Philip Lowe warned about the near-term outlook of the Australian economy. He said that he expects the unemployment rate to remain higher while incomes will fall. 

The US dollar declined against key currencies as traders reflected on the better news from Europe and the latest vaccine news. A report by Lancet said that a vaccine being developed by AstraZeneca and Oxford University had produced a promising immune response in early trials. The trial involved more than 1,000 people aged between 18 and 55. The report said that the vaccine produced antibodies and killer T-cells to combat the infection that lasted for at least two months. Just last week, we received news that a vaccine by Moderna had showed positive results.

EUR/USD

The EUR/USD pair rose to an intraday high of 1.1453. On the four-hour chart, the price is above the short and medium-term moving averages. It is also above the important resistance of 1.1420, which was the highest point in June. The main and signal line of the Stochastic Oscillator have risen close to the overbought level. Therefore, in the near term, it’s possible that the price will drop to 1.1420 as traders sell the recovery fund news. 

GBP/USD

The GBP/USD pair rose to an intraday high of 1.2673. The price is above the 50-day and 100-day EMAs while the RSI has moved close to the overbought level. Also, it is above the 23.6% Fibonacci retracement level. It is also making gains in the fifth consecutive bar, meaning that bulls are now in total control. This is likely to see the price continue rising as bulls target the next resistance at 1.2700.

AUD/USD

The AUD/USD pair rose to an intraday high of 0.7040 as traders reacted to the minutes by the RBA. On the daily chart, the price is slightly below the 50-day and 25-day exponential moving averages while the RSI is slightly below the overbought level of 70. Also, the money flow index has moved close to the overbought level. Therefore, the pair is likely to continue rising as bulls attempt to move past the important resistance of 0.7057.