The euro is in no hurry to throw in the towel

The single European currency received two painful blows, however, as soon as there was a gap in the clouds, it managed to return above $1.08. The verdict of the German Constitutional Court on the legality of QE and rumors about the resuscitation of the US-China trade war turned the "bulls" on EUR/USD to flight. The split of the Eurozone, the restriction of the ECB's monetary expansion potential, and the deterioration of international trade are not empty words for the currency bloc, which is groaning under the burden of a pandemic. Therefore, the weakness of the euro seems logical.

The German Constitutional Court surprised by its decisions. They admitted that buying bonds under QE is not financing the government, but recognized the verdict of the European Court of Justice as illegal and demanded that the ECB explain why the benefits of the quantitative easing program outweigh its side effects. This topic came up quite often at meetings of the Governing Council in 2018-2019, but the pandemic has rallied bankers, and even the "hawks" do not object to the expansion of the stimulus package. According to Christine Lagarde, the ECB is independent and accountable to the European Parliament, and it will continue to do everything possible to save the Eurozone economy. This response to the judges convinced investors that they could not force the regulator to limit QE, which calmed the financial markets of the Old World and the "bulls" for EUR/USD.

Dynamics of EUR/USD and spreads on credit default swaps of the USA and Germany

Pressure on the euro was created by rumors about new duties on Chinese imports. Donald Trump first accused China of the alleged laboratory origin of the coronavirus, and then of failure to fulfill obligations to increase purchases of American products by $77 billion in 2020. Nevertheless, the chief negotiators, represented by Vice Premier Liu He, trade representative Robert Lighthizer and Finance Minister Steven Mnuchin, expressed confidence that by the end of the year, exports will grow by the necessary amount, which cooled the ardor of sellers of EUR/USD.

Support for the single European currency was provided by US stock indices, which positively received the news that the escalation of the trade conflict between Washington and Beijing is being postponed, as well as rumors about the readiness of Democrats in the House of Representatives to expand the stimulus package by $750 billion. In addition, the statistics on the American labor market were not as terrible as Bloomberg experts expected. Unemployment fell short of 16%, limited to 14.7%, and employment outside the agricultural sector fell by 20.5 million instead of 22 million.

The options market signals that investors are under no illusions about the emergence of a stable trend in the EUR/USD pair since both the euro and the US dollar have their own vulnerabilities.

The volume of options trading on the EUR/USD with a defined strike prices

In my opinion, even the exit of the pair's quotes beyond the lower border of the "Rhombus" pattern, which implies a break in support at 1.077-1.0775, will not allow us to speak with confidence about the continuation of the peak of EUR/USD. Only the formation of a subsidiary model of the "Expanding Wedge", which requires updating the April minimum at 1.073, will clarify the situation and allow you to think about shorts.

EUR/USD, the daily chart

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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