EUR/USD Explodes Higher Despite the EU’s Struggles On Coronavirus Budget

EUR/USD has gained nearly 1.5% higher today in another extremely volatile trading day. The EUR bulls have managed to push the price higher on broader USD weakness, despite the Brussels struggles to come up with a unified approach in dealing with the economic fallout amid the coronavirus outbreak.

Fundamental analysis: MPs demand a new EU long-term budget

European Union (EU) leaders have failed to agree on the unified approach in dealing with the coronavirus economic crisis in their third discussion by videoconference. The EU has struggled to agree on the new seven-year budget even before the coronavirus outbreak.

Influential members of the parliament (MPs) have asked for the draft of the new budget (2021 – 2027) to be updated to include additional budget funds to deal with the consequences of the coronavirus outbreak.

“The situation today has very little in common with almost 2 years ago, when the MFF [budget] 2021-2027 proposal was put forward,” said the chair and the coordinators of the political groups in the European Parliament’s Committee on Budgets.

The latest draft foresees funds exceeding €1 billion, which is by many seen as a low figure given the circumstances. Therefore, a group of MPs have been calling for the EU leaders to use around €7 billion, stemming from the unspent 2019 budget and unallocated funds from the 2020 budget.

“[We] strongly renew our call on the European Commission to act realistically and responsibly and to urgently update its MFF proposal to take account of the new challenges and needs deriving from a post-Corona world,” a group of MPs said in a statement.

Major European countries are also at a disagreement on how deep the EU should dig into its €410 billion-worth “European Stability Mechanism” fund.

Technical analysis: EUR/USD hits key resistance

EUR/USD has gained nearly 150 pips today, which accounts for 1.36%, in the fifth consecutive positive day for the pair. Following the creation of the 3-year low in the low $1.06s, the EUR bulls have responded extremely well and have managed to get back to the $1.10 handle.

As seen in the chart, the price action is now testing the confluence of resistance in the $1.1030 – $1.1100 range. A break of this zone should pave the way for $1.1150. Given today’s close, the $1.0990 level has now become a support.

Summary

EUR/USD has recorded another positive day today despite the disagreements in Brussels over the sizes of the EU’s next seven-year budget and the fund to support the economic activity amid the coronavirus outbreak.