EUR/USD: Testing Highest Level In Months - Wednesday, July 15

For four trading sessions in a row, the EUR/USD has been in the range of an upward correction that pushed towards the 1.1423 resistance in early trading. This is its highest level in four months, before settling around 1.1395 at the time of writing. 

The pair's gains came in conjunction with rising tensions between the United States and China, and after German Chancellor Angela Merkel drew a line in the sand over negotiations regarding the European Recovery Fund before the European Union Council meeting on Thursday, July 16, which is the most important event this week and the most influential on the single European currency.

US Secretary of State, Mike Pompeo, defined a formal US rejection to Chinese territorial claims in the South China Sea, hours after a Reuters report showed the White House's interest in Chinese companies listed in US markets, which had spoiled the mood of investors, who were mainly suffering from the increase in new COVID-19 cases.

This was apparent among investors of stocks and many currencies after California announced new restrictions on the "closure" style of activity on Monday, July 13, to cope with the high cases of COVID-19 infection. The flexibility of the Euro comes before the European Council meeting in particular, in which it is hoped that some form of progress towards an agreement among member states will be achieved. 

Analysts believe that passing this agreement will increase the Euro’s gains, even if that was in the medium term. In the event that the agreement fails, which is possible, especially after Merkel's recent statements, the EUR/USD pair will be vulnerable to a drop to the 1.1100 support.

In a statement after a meeting with Italian Prime Minister Giuseppe Conte, Merkel said that the so-called economical member states should not seek to reduce the volume of spending to recover from the coronavirus mentioned in the next multi-year budget of the European Union, and for his part, the new alternate president of the European Council said that it was not clear whether an agreement will be reached regarding the next multi-year budget for the European Union or the recovery fund, but he confirmed his willingness to negotiate its last structure.

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