- EUR/USD has continued this month to move higher after recording gains in May and June
- EU leaders are due to meet in Brussels next week to discuss the recovery fund and a new long-term EU budget
- The bullish pennant continuation pattern is now activated as the buyers look to extend the run to $1.19
EUR/USD price is working to record the third straight bullish month after edging higher in May and June. The buyers are in firm control of the price action as they look to extend the rally to $1.15, at least, and then $1.19 before the year ends.
EU Summit in focus
The latest data from Europe shows that industrial production in Italy and France has positively surprised investors. The output rebounded more strongly than expected in May as factories reopened after lockdowns.
Industrial output jumped by 19.6% in May in France, much better than forecasts of a 15.1% rise. Even better, the Italian industry’s production rose 42.1% in May, almost doubling the expectations of a 22.8% jump.
If the trend continues, then investors will be looking to invest in EUR more as the coronavirus-related situation in the United States is worse. Separately, a wider agreement on the proposed EU Fund could facilitate another leg higher in EUR/USD.
The draft plan drafted by European Commission, supported by Germany’s Merkel and France’s Macron, calls for grants worth €500 billion. However, Austria, the Netherlands, Denmark, and Sweden are yet to be convinced. On July 17 and 18, the EU leaders are expected to meet physically in Brussels to discuss the recovery fund and a new long-term EU budget 2021-2027.
“Germany is prepared to show extraordinary solidarity”, Merkel said in a speech in front of the European Parliament before adding that “Europe is capable of achieving great things if we work together and stand together in solidarity”.
Bullish pennant activated
The recent rally in EUR/USD has seen the price action break above the descending trend line trading around $1.1270. This is the upper (resistance) line of a bull pennant, which is a bullish continuation chart formation.
A bull pennant aims to extend the current uptrend higher after the brief consolidation of the price action. This consolidation occurred in June and a break of the upper trend line activated the bull pennant.
The measured target for this chart formation comes around the $1.19 mark. This zone also hosts the 100-MMA, currently trading at $1.1879. Before, the buyers will have to clear an 18-month high at $1.15.
EUR/USD price has been trading in a continuous uptrend for the past two to three months. The buyers, who are in control so far, are now looking to extend the rally to $1.19 on the back of the bull pennant chart pattern.