The EU leaders' summit held on Friday by a videoconference, did not catalyze the growth of the euro. However, the results of the online meeting did not sink the euro due to its predictability. Such a peculiar balance allowed the EUR/USD bulls to stay afloat and not collapse to the base of the 11th figure. Today, buyers decided on corrective growth, which, however, was mainly due to the weakening dollar. In general, traders of this pair will continue to focus on the greenback at least towards the medium term.
But let us focus on the results of the Friday meeting. Despite the absence of tangible results, certain conclusions can still be drawn. For almost five hours, EU leaders, together with the leadership of key European institutions, tried to find a common denominator on two key issues. First, the creation of the 750 billion eurozone economic recovery fund, second, the approval of the seven-year EU budget plan for 2021–2027 (the total estimated amount is 1.1 trillion euros). Looking ahead, it should be said that a common denominator was never found: the differences between the leaders of the EU member states were too serious. This is an absolute negative for the euro which price recently rose solely due to the anti-crisis plan of the European Commission, which was presented at the end of May.
The June online summit only confirmed and once again recalled the existing contradictions. As expected, the Netherlands, Austria, Denmark, Sweden proposed to form a fund not of non-repayable payments, but of lump-sum loans, and not more than two years with a limited scope of spending. The so-called "mean four" insisted on its position, indicating its opposition to the plans of the European Commission. This fact was not news for the market, but at the same time served as an anchor for the single currency. In addition, as EC head Ursula von der Leyen clarified a little later, disagreements remain in such issues as the size of the package, the method of sending funds, and the balance between grants and loans in the recovery fund (in the current version it is 500 to 250).
Nevertheless, despite the voiced disagreement, the euro did not sink to the bottom. Traders focused on the optimistic attitude of the President of the Council of the EU, Charles Michel, who said during the summit that "a common point of view was developed on the need for a quick response to the ongoing crisis." He specified that he plans to convene a summit of EU leaders by mid-July (which should take place in a classic format). The head of the European Commission also expressed hope that a compromise could be found before the August summer holidays. According to her, despite the existing disagreements, the participants in the summit unanimously agreed that the seriousness of this crisis justifies an ambitious common response.
Thus, the results of the online summit, on the one hand, did not surprise the market with their empty result, but, on the other hand, they kept hopes for a compromise. Now the euro will live on standby for several more weeks, that is, until the July summit.
This, of course, does not mean that the EUR/USD pair will freeze until mid-summer. The euro will simply focus more on the dynamics of the greenback, simultaneously reacting to current macroeconomic statistics. For example, tomorrow key EU countries will publish PMI reports. In general, experts expect positive dynamics - both in the manufacturing sector and in the service sector. EU countries are gradually opening their borders and restoring tourism, so the market reaction should be positive. The very fact of a positive trend can strengthen the bullish sentiment for the pair.
But long positions should be considered only when overcoming the resistance level of 1.1290. At the moment, the price on the daily chart is located on the middle line of the Bollinger Bands indicator, and the trend indicators have not formed any clear and unambiguous signals. Nevertheless, if buyers show character and the pair consolidates above the mark, then the Ichimoku indicator will generate a bullish signal "Parade of Lines" - in this case, it will be possible to consider long positions with the target of 1.1422 (local maximum on June 10). Another important indicator on Tuesday is the index of business activity in the US manufacturing sector. In May, it rose to 39.8 points, but in June a sharper recovery of the indicator is expected - up to 52 points. If the indicator remains below the key 50-point mark, the EUR/USD pair will get an additional reason for its recovery.
