EUR/USD: Four risks threatening the leg higher

Can the EUR/USD pair continue higher after hitting the highest since early April? Yohay Elam, an analyst at FXStreet, explains four reasons which could dampen the euro recovery.

Key quotes

“1) Not a done deal just yet: Members of the ‘Frugal Four’ may still have reservations about the recovery fund. If these countries, most importantly the Netherlands, voice their objections, the common currency could suffer. Keeping quiet or endorsing the plan may continue supporting it.”

“2) Sino-American tensions: The US and China are at odds also over the latter’s human rights violations in Xinjiang, technology, and other topics. A renewed focus on the potential economic fallout could send the dollar higher. However, as long as Hong Kong continues functioning, markets will shrug off issues of autonomy.”

“3) Second waves? Coronavirus figures continue falling in the old continent, yet occasional clusters have appeared. As long as these remain isolated cases and the trend remains upbeat, the euro can continue rising. A setback may limit its gains.”

“4) Data dump: Spain’s Consumer Price Index for May dropped by 1% yearly as expected and Germany’s is also set to be depressed, mostly pressured by the tumble in oil prices. The statistics feed into the all-European numbers due out on Friday.”