EUR/USD jumps as euro bulls cheer EU summit deal. But will it last?

EUR/USD eyes multi-year trend resistance as bulls make push

• EUR/USD extends its climb as euro bulls push the bloc currency to a 23-month high
• Euro price action has benefited from a €750 billion stimulus deal just reached
• Euro could keep advancing judging by retail forex trader positioning

The euro has been ripping higher over the last two months. Euro strength largely stems from positive tailwinds provided by a €750 billion recovery fund that France and Germany proposed in May, which was just approved by eurozone officials at the European Union (EU) summit earlier this week.

Desperately needed fiscal stimulus looks to boost the coronavirus-battered economy and accelerate gross domestic product (GDP) growth prospects. In turn, this has helped facilitate a sharp 7% advance by EUR/USD off the $1.08 price level.

EUR/USD price action now hovers a touch below the $1.16 level following recent euro gains, but is there room for the most liquid and heavily traded currency pair to continue its climb? Looking at a EUR/USD chart with weekly candlesticks a broad bearish trend can be identified by the series of lower highs printed over the last several years.

Spot EUR/USD is still some way from running into this technical obstacle that may serve as a potential topside objective for euro bulls, however. It is also worth mentioning that this resistance zone happens to align with the 23.6% Fibonacci retracement level of EUR/USD’s trading range since 2008.

That said, shifting focus to IG Client Sentiment hints at the possibility for more euro upside against its dollar peer. According to the latest IG Client Sentiment Report, 29.3% of EUR/USD retail traders are net long on the major currency pair.

This suggests a bullish trading bias since we typically take a contrarian view to crowd sentiment, which is widely driven by retail traders’ tendency to position against the prevailing trend.