EUR/USD extends gains from surge higher yesterday, nears the 1.1000 level

Technical Analysis

EUR/USD pushes to a session high of 1.0990, highest level since 15 April

EUR/USD D1 01-05
Although the surge higher yesterday owed to month-end fixing flows, the near-term technical bias in the pair had been more bullish and the move took out key resistance around 1.0880-00, a level that been limiting gains in the pair over the past two weeks.

Upon a break of that, EUR/USD raced higher to close the day around 1.0950 levels.

And as we look towards North American trading, buyers are still building on the move to come close to a test of the 15 April high @ 1.0991.

The 1.1000 handle will be a key psychological resistance level but it also comes alongside a confluence of other key resistance levels, namely the 100-day MA (red line).

That sits at 1.1006, so there is stern resistance in the pair around 1.0991-06 and that will prove to be a real test of buyers’ resolve in the coming sessions.

Beyond that, there is also further resistance from the 200-day MA (blue line) @ 1.1035.

Those will be key levels to watch for EUR/USD as buyers try to chase further upside momentum over the next few sessions.

From a fundamental perspective, the ECB failed to really light things up yesterday but the changes to TLTRO conditions is an interesting one to take note of:

“For counterparties whose eligible net lending reaches the lending performance threshold, the interest rate applied from 24 June 2020 to 23 June 2021 on all TLTRO III operations will be 50 basis points below the average interest rate on the deposit facility prevailing over the same period, and in any case not higher than -1%. The deposit facility rate is currently -0.5%.”

Essentially, you can take that as being a rate cut without actually announcing a rate cut.

That in turn may weigh on euro area yields and when you evaluate the currency based on rates, the wider bund yields spread against other countries may be a little unfavourable to the euro if this reverberates to broader markets.

In fact, the yields spread between 10-year Treasuries and bunds widened in favour of the former by 10 bps yesterday:

USGG10YR

Although, one can still argue that the large narrowing of the spread over the past few months far outweighs the minuscule move yesterday but still, it is one consideration.

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