- EUR/USD has broken out of a significant consolidation zone between 1.07950 and 1.09830, to the upside.
- EU unravels a EUR 2.4 trillion 7-year recovery plan.
- Dollar Index takes a tumble below key 98.85 support level.
- EUR/USD bullish trade idea.
EUR/USD has broken out of a consolidation zone between 1.07950 and 1.09850 (a 188 pip range) prices have been trading between this range since mid April.
Technically speaking prices should extend the range traded within the consolidation zone, which is 188 pips. Currently prices have moved 100 pips north, suggesting there is scope for another 80 pip upwards push to the daily resistance at 1.11730.
As illustrated in the figure above, prices are currently forming a pendant structure, which typically follows a bullish outbreak. In line with a strong fundamental stance, there is a high probability this pair will push higher.
EU unveiled a EUR 2.4 trillion 7-year recovery plan, including the EUR 750 billion of joint debt issuance. This has bolstered EUR/USD higher, in the recognition that the EU have begun collaborating together in some capacity to provide much needed economic stimulus packages.
Traders should bear in mind that this plan still needs to be accepted by all 27 EU countries , whose leaders will meet on the 17th June.
Next week Germany is expected to announce another stimulus package according to Bloomberg.
Chancellor Merkel has pushed a 2nd phase stimulus amounting between EUR 50-100bn with the Social Democrats pushing for the upper end and Merkel’s CDU pushing for greater caution.
A plan is expected to be revealed on the 2nd of June.