EUR/USD: Trendline support at 1.1423 underpins the move higher – TDS

After a marathon four-day summit, EU leaders struck a deal on their 7-year budget, which includes €750 billion in support for countries worst-hit by COVID-19. EUR/USD registered only a muted reaction to the Recovery Fund deal announcement as an initial spike up to 1.1470 was quickly faded as a ‘sell the fact’ dynamic soon emerged, per TD Securities.

Key quotes

“After extending their two day summit to four, all 27 EU leaders signed off on a compromise 7-year budget (the Multiannual Financial Framework, or MFF), that includes a €750 billion recovery package to help economies worst hit by COVID-19, called Next Generation EU.”

“EUR/USD has remained largely stable in the wake of the announcement. Stronger risk appetite has helped offset the typical "sell the fact" dynamic we may otherwise observe. Valuation and positioning are becoming more of a concern near-term as the technical picture also turns less friendly for further gains.”

“EUR/USD can still participate in further USD weakness, however, particularly if risky assets continue their ascent. With an eye on key support around 1.1422 today, a sustained move above 1.15 would keep us on a bullish tactical trajectory.”