EUR/USD setback on a stalling EU recovery plan – OCBC

Much optimism has been priced in the EU meeting to discuss the virus recovery fund on Friday and any signs of stalling may see the common currency pare back on gains. Terence Wu, an FX strategists at OCBC Bank, prefers to sell EUR/USD on rallies prior to the event. 

Key quotes

“The European Union leaders' discussion on the virus recovery fund is scheduled for Friday. Merkel is optimistic that it will be agreed by July, but the discussions should reveal how much support it really has. Recent EUR positivity is, in part, stemmed from optimism that this recovery fund can be pushed through. Any sign of delay should lead the market to pare back on recent EUR gains.”

“Expect the EUR/USD pair to be implicitly heavy into the event risk, with 1.1300 potentially capping. Prefer to sell on rallies, with 1.1200 expected to attract.”