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FX.co ★ Trading plan for EUR/USD and GBP/USD on 07/21/2020

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Forex Analysis:::2020-07-21T07:49:38

Trading plan for EUR/USD and GBP/USD on 07/21/2020

Both the single European currency and the pound strengthened noticeably yesterday. It is another matter that only political factors were the reason for their growth. After all, the macroeconomic calendar is completely empty and it will remain empty until Thursday. So market participants have no choice but to focus only on the statements and actions of all kinds of politicians. And it should be noted that they cope with this task in the best traditions of Mexican soap operas. The summit of the leaders of the countries of the European Union alone is worthy of a whole film epic. Once they got together, everything went wrong. The heads of state could not agree on anything and immediately quarreled. But they gathered in order to discuss the issue of withdrawing the European economy from the impasse into which it has entered, as many say, due to the coronavirus epidemic. It is clear that such a turn could drive anyone into despondency and sadness. But in the best traditions of the highest standard of drama, the rural amateur theater group, began with good news yesterday. It became known that some countries decided to act as the rescuers of the entire Old World and agreed to form a fund of as much as 390 billion euros, even if no agreement could be reached. Moreover, they agreed to assume the role of rescuers in Malibu, not just anyone, but the Netherlands and Sweden added by a couple of smaller countries. Realizing that they would look like enemies of humanity in the new circumstances, other countries immediately joined the initiative.

Therefore, the fund had grown to 750 billion euros by the evening and so, there were plenty of reasons to open champagne. However, the intrigue still remains. The thing is, that the question of using this stabilization fund remains unresolved. The largest countries insist that money should be allocated exclusively for strictly defined needs, as well as in the form of loans. Smaller countries, which are already in debt as in silk, demand that countries can use these funds at their discretion. Well, there is not for vaccines and the modernization of the health care system, but for pensions and social benefits – many more wonderful discoveries await us. And as you might guess, it is the course of these negotiations that will determine the mood of market participants in the next couple of days. Here, it is worth noting the fact that, despite the rather optimistic messages, the growth of the single European currency was relatively modest. It's just that the single European currency is seriously overbought and so, it really has nowhere to grow.

Trading plan for EUR/USD and GBP/USD on 07/21/2020

The pound's growth has also been linked to the coronavirus. As they say, a pound is a proud bird – if you don't kick it, it won't fly. So, the role of that kick was fulfilled by the agreement between the UK government and one of the largest pharmaceutical companies in the world on the acquisition by the United Kingdom of about 90 million doses of the coronavirus vaccine. And this despite the fact that, according to the assurances of doctors, an effective vaccine will appear no earlier than the first quarter of next year. In addition, the volume of the order also raises the question, since it is one and a half times the population of the UK. However, this was not enough for Boris Johnson and so, a little later, he gave the pound an additional kick in the form of a loud statement that under no circumstances there would be no re-introduction of quarantine. In general, the economy and money are above all even human lives. Apparently, not only the titans of thoughts from the Internet, but also politicians really believe that the economy is something that lives on its own. They seem to find it difficult to believe in the simple idea that the economy is the result of economic activity that people carry out. That is, if there are no people, then there is no economy. But so far, everyone is on an optimistic note and the pound is growing. Another thing is that this cannot go on for long. Moreover, like the single European currency, the pound is clearly overbought.

Trading plan for EUR/USD and GBP/USD on 07/21/2020

The euro/dollar currency pair naturally fluctuates in the range of 1.1400/1.1460, noticeably feeling pressure over itself, which can be defined as the overbought euro. In turn, fluctuations in the range will remain in the market, where the breakout of the established boundaries is considered the most optimal trading tactic.

Trading plan for EUR/USD and GBP/USD on 07/21/2020

The pound/dollar currency pair is showing high activity, on the basis of which an inertial upward movement arose, which brought buyers to the area of the June 16 high of 1.2690, and speculators do not stop there. It can be assumed that the pound is already overbought in the market, but if speculative interest is retained, the price may move towards the range level of 1.2770.

Trading plan for EUR/USD and GBP/USD on 07/21/2020

Analyst InstaForex
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