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Waiting for EU Recovery Fund

EUR/USD – Daily Candlesticks
Source: GKFX / MT4 (November 22, 2020)

EUR/USD has been consolidating underneath 1.19 for 3 months. Having held 1.16 as support, the currency pair could be set for a breakout and a continuation of the longer term uptrend.
 

TAKEAWAYS


•    Euro stalls amid holdup of EU Recovery Fund
•    Mnuchin will not extend Fed emergency lending tools past January
•    New restrictions in New York, California weigh on US stocks
•    Bitcoin pullback from just under $19,000
•    DAY AHEAD: Eurozone, UK, US November PMIs
 

GURU WISDOM


“Money won’t buy happiness, but it will pay the salaries of a large research staff to study the problem.” – Bill Vaughan
 

MARKETS


*Daily closing price
EUR/USD    1.1853        ↘ 0.16%
GBP/USD    1.3282        ↗ 0.16%
USD/JPY    103.85        ↗ 0.13%
S&P 500    3557.54    ↘ 0.68%
Hang Seng    26,451        ↗ 0.36%
Gold        1869.60    ↗ 0.44%
Oil (Brent)    44.96        ↗ 1.36%
Bitcoin        18660        ↗ 4.6%
 

NEWS

 

EUR - EU Recovery Fund delay


Currency markets continue to track sideways and one reason is the impasse over the EU Recovery Fund and the 7-year budget. The approval of the €750 billion fund would improve the economic prospects of Europe and could be a positive catalyst for the euro. EUR/USD is sitting below 1.19 (see chart) at level that was reached in the summer when the deal was first agreed so once it is finalised there is the chance to see the euro breakout. At the moment Poland and Hungary are holding up the process over so-called ‘rule of law’ provisions. 
 

End of Fed emergency programs


US Treasury Secretary Steve Mnuchin unexpectedly declined an application from the Federal Reserve to extend some of its emergency lending programs past January. That takes a ‘backstop’ away from the financial system and an extra source of liquidity. Gold and Bitcoin have been trading higher this year as a hedge against US money-printing. The end of these programs will remove some of the possible future sources of money printing.
 

New York restrictions 


Wall Street closed lower for a fourth day on Friday as investors reacted with caution to rising cases of covid-19 in the US and elsewhere. The rising cases have led state governments to enact tighter restrictions including the closure of restaurants and limiting the size of gatherings. There is a battle raging in markets between the longer term optimism being brought on by the vaccine and shorter term pessimism due to governments limiting economic activity.
 

DAY AHEAD 


*Times in GMT
08:15 – France – Markit services PMI (Nov) – 34 exp vs. 47.5 prev
08:30 – Germany - Markit Manufacturing PMI (Nov) – 56.5 exp vs. 58.2 prev
09:30 – UK – Markit services PMI (Nov) 53 exp vs. 53.4 prev
14:45 – US - Markit Manufacturing PMI (Nov) PREL - 53 exp vs. 53.4 prev    
14:45 – US - Markit Services PMI (Nov) PREL - 55.5 exp vs. 56.9 prev