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EU deal and coronavirus vaccine hopes keep U.S. dollar at bay

The euro marked a fresh four-month high and commodity currencies found support on Tuesday, after European countries agreed on a rescue package for the bloc’s coronavirus-hit economies.

The hard-won deal – a compromise on concerns that thrifty northern states had about handouts for more profligate neighbors – was hailed as an important signal of unity by Europe’s leaders and as a foundation for recovery.

It pushed the euro 0.2% higher to $1.1470, its strongest since early March, although it soon retreated back to just below flat since the agreement was widely expected.

“The deal is a positive, a show of solidarity, securing a stronger economic recovery,” said Christopher Wong, senior FX strategist at Maybank in Singapore.

“Markets-wise, the positive news was already priced in,” he said. Further gains from here were likely to be “sticky,” although a break past the euro’s March top of $1.1495 could open the door for a rise to $1.16 levels, he added.

The deal provided support to fragile broader sentiment and, along with encouraging results from several COVID-19 vaccine trials, kept safe havens such as the greenback under pressure.

Against a basket of currencies, the dollar made a fresh four-month trough at 95.634 and struggled for headway in the Asian session.

The Japanese yen was steady at 107.21 per dollar.

The Australian dollar clung on above 70 U.S. cents after the central bank offered few surprises in minutes from last month’s meeting or a speech from Governor Philip Lowe.

Lowe said Australia’s monetary policy would remain accommodative for as long as necessary and added that although he would prefer a cheaper Aussie dollar, its 27% recovery from March lows was supported by fundamentals.

“We can’t, at the moment, make the case that the Australian dollar is misaligned,” he said in webcast remarks. The Aussie last sat at $0.7018 and the kiwi at $0.6566.

According to Trading Central (3rd party RIA) the EURGBP is long positions above 0.8860 with targets at 0.9180 & 0.9390 in extension.

* Past performance is not a guarantee of future performance

Number of Lots:Required Margin:Risk Management (50%):Potential Profit/Loss 0.9180
1€ 3,333.33€ 1,666.67€ 1,773.92
5€ 16,666.67€ 8,333.33€ 8,869.60
10€ 33,333.33€ 16,666.67€ 17,739.20
25€ 83,333.33€ 41,666.67€ 44,348.00
50€ 166,666.67€ 83,333.33€ 88,696.00

GBP/USD faces extra upside above 1.2740 – UOB

FX Strategists at UOB Group noted Cable is likely to accelerate the upside on a breakout of the 1.2740 level in the next weeks.

Key Quotes

24-hour view: “Our expectation for GBP to trade sideways was wrong as it surged to an overnight high of 1.2666 before extending its gain this morning. Momentum remains strong and further GBP strength would not be surprising even though the major resistance at 1.2740 may not be easy to crack (1.2700 is already quite a strong resistance). On the downside, 1.2605 is expected to be strong enough to hold any pull-back (minor support is at 1.2640).”

Next 1-3 weeks: “After trading sideways for several days, GBP lifted off and is currently approaching the top of our expected range of 1.2470/1.2700. In view of the rapid build-up in momentum, a break of 1.2700 would not be surprising. All in, GBP is expected to trade with an upward bias and if it breaks the major 1.2740 level, it could lead to a rapid rise towards the June’s peak at 1.2812. On the downside, a breach of 1.2560 (‘strong support’ level) would indicate our positive view for GBP is wrong.”

According to Trading Central (3rd party RIA) the GBPUSD is long positions above 1.2400 with targets at 1.2815 & 1.2980 in extension.

* Past performance is not a guarantee of future performance

Number of Lots:Required Margin:Risk Management (50%):Potential Profit/Loss 1.2815
1€ 3,695.49€ 1,847.75€ 1,092.00
5€ 18,477.46€ 9,238.73€ 5,460.00
10€ 36,954.92€ 18,477.46€ 10,920.00
25€ 92,387.29€ 46,193.64€ 27,300.00
50€ 184,774.58€ 92,387.29€ 54,600.00