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EUR/USD Rallying Towards a Multi-Week High, ECB And Bundesbank May Clash

EUR/USD Rallying Towards a Multi-Week High, ECB And Bundesbank May Clash

Nick Cawley, Strategist

EUR/USD Price, News and Analysis:

  • EUR/USD making another run at 1.1000 and above.
  • ECB may clash with the Bundesbank over QE commitment.
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Will the ECB take the Bundesbank to Court?

The ECB may well pick up the Bundesbank’s PSPP commitments if a German court rules that the current quantitative program is not legal and appropriate. According to a Reuters report, the ECB would take up the Bundesbank’s PSPP allotment and in a worst-case scenario also launch legal action against the German central bank to bring it back into the fold. While there is a possibility or one or both of these actions occurring, it is likely that the Bundesbank will prove to the German court that the ECB’s actions are appropriate. If however the German court rule against additional bond buying, the Euro would come under heavy pressure and talk of the demise of the single currency would increase. The German court ruling is expected in early August.

A positive risk backdrop Tuesday helped push EUR/USD back towards 1.1000 and levels last seen in late-March. Risk sentiment has been buoyed by the gradual unwind of COVID-19 lockdowns across Europe, falling fatality and infection rates and reports of various ongoing drug trials.

EUR/USD has rallied the best part of one big figure so far today and nears important resistance around the 1.1000/1.1020 area. If the pair are going to move higher still, they will need to break 1.1000 big figure resistance, the 200-day moving average at 1.1010 and two recent highs just below 1.1010 and 1.1020. Above here lies the 50% Fibonacci retracement level of the recent sell-off at 1.1066. To the downside, there is short-term support between 1.0885 and 1.0895.

EUR/USD Daily Price Chart (November 2019 – May 26, 2020)

EUR/USD Rallying Towards a Multi-Week High, ECB And Bundesbank May Clash
EUR/USD BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 8% -10% -1%
Weekly 26% -10% 6%
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What is your view on EUR/USD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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