EUR/USD price hits crucial multi-year resistance on the EU recovery deal

EUR/USD price hits crucial multi-year resistance on the EU recovery deal
  • EUR/USD price rose 2% to hit a 22-month high above $1.1650
  • Italy and Greece are set to receive a major part of the 750 billion euros stimulus package
  • A confluence of resistance levels is located between $1.1650 and $1.1750

EUR/USD price registered the week since March by gaining 2% to trade above $1.16 for the first time since September 2018. The EUR bulls received a massive boost after the European Union agreed a massive €750-billion coronavirus recovery package.

Fundamental analysis: Greece and Italy relieved

Italy, Spain, and Greece are among the countries that gained a massive boost after the EU agreed a €750-billion coronavirus recovery package. Given the severity of the COVID-19 outbreak that took place in Italy from February to April, the EU decided that this country should receive the largest part of the dedicated €750-billion coronavirus recovery package.

Thus, Italy should receive €209 billion as a part of the dedicated coronavirus bailout package. The virus took over 35,000 lives in Italy, and the country’s economy, which depends largely on tourism, is estimated to decline over 11% in 2020.

“We have the possibility to relaunch Italy with strength, to change the face of the country,” said Italy’s Prime Minister Giuseppe Conte. 

“Now we must hurry. We must use this money for investments, for structural reforms.”

On the other hand, Former Deputy Prime Minister Matteo Salvini has condemned the deal, arguing it would result in austerity measures for the nation.

Separately, Kyriakos Mitsotakis, Prime Minister of Greece, has also praised the deal and called the stimulus plan a “national success.”

Greece will get about €72 billion from the package to help the country recover from a hard blow it took during the pandemic. The country’s government said the recovery program is a good chance for Greece to diversify its economy and invest in other sectors like green energy and new technologies.

Greece will remain undisturbed by talk of conditions being set for the distribution of EU funds. Over recent years, Greece has attempted to prove to international leaders that it initiated structural changes developed to modernize the country’s economy and cut its deficit, in order to receive a part of the stimulus. 

Technical analysis: Price testing critical resistance

EUR/USD price gained 2% to close at weekly highs above $1.1650. This is the highest price action traded since September 2018. Looking from this perspective, the break above $1.14 only accelerated the uptrend. 

EUR/USD weekly chart (TradingView)

The beginning of the next trading week holds the key for EUR/USD. The price action closed exactly where the multi-year descending line trades. We may see EUR/USD slightly extending higher to tag another important resistance at $1.1720 before the pullback takes place. 

Under the more bullish scenario, the bulls may push to complete the bull pennant chart pattern above $1.19.

Summary

EUR/USD rose 2% this week to hit the 22-month high above $1.1650. Under the terms of the EU relief package, Italy and Greece will receive a major financial injection to help their hard-hit economies recover.

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