Yesterday, the German government announced the establishment of an off-budget defense infrastructure fund totaling 500 billion euros, with the potential to reach up to 900 billion euros over the next ten years. They also revised the borrowing limits, allowing for levels beyond the current threshold of 3% of GDP and a growth rate surpassing 0.35% per year, as mandated by current legislation.
As a result, the yield on 5-year government bonds increased from 2.17% to 2.47%, and the euro appreciated by 1.60%, or 162 pips.
Currently, the next target price for the euro is 1.0882, followed by a peak of 1.0949 reached in July 2024. In theory, the euro might have entered a medium-term uptrend if it surpasses 1.13; however, there are no clear technical indicators to support this assertion at the moment. A confirming signal would be a breakout above the July 2023 high of 1.1276, which would also signify an exit from two descending price channels on the weekly chart.
For now, the euro is set to test the MACD line near 1.0960. According to the daily chart, the nearest target is still 1.0882, with the subsequent target at 1.0949.
The four-hour chart indicates that the market is currently overbought based on the Marlin oscillator, suggesting that a correction from the 1.0882 resistance level is likely.
