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Dollar looks for benefits. Forecast as of 13.11.2020

Dollar looks for benefits. Forecast as of 13.11.2020
Investors wonder if it is relevant to sell the greenback as a safe haven or to buy because the US economy performs better than the euro-area. Therefore, the EURUSD tends to consolidate. Let us discuss this and make up a trading plan.

Weekly US dollar fundamental forecast

The market is like an ocean; the calm follows the storm. But calm sometimes is anxious; investors can’t define the further trend direction. Investors start exiting longs on the US stocks amid the record number of hospitalizations in the USA. Besides, the number of new COVID-19 cases is above 100,000 per day during nine consecutive days, and some US governors impose new restrictions. Another strict lockdown will hardly occur, but local isolation will result in job losses and an economic downturn. The EURUSD bulls will lose the major benefit if the S&P 500 fails to continue the rally.
The euro is supported by easing the market uncertainty and the hope for the global GDP recovery amid the vaccination. The US dollar could benefit from the divergence in economic expansion and monetary policies. According to 90% of 65 Wall Street Journal experts, the financial markets' uncertainty will ease as the US voting results are announced, and there is positive news about the vaccines. 80% of specialists expect the market to stabilize soon. According to Christine Lagarde, the ECB sees far less uncertainty than before amid Joe Biden's victory, progress on Brexit, and successful vaccine tests. The more clarity there is in the market, the less reason to buy safe-haven assets, including the US dollar.
On the other hand, the greenback should benefit from US economic performance. According to Wall Street Journal experts, the euro-area economy is likely to face a double recession while the US economy will show better results than earlier expected. The US GDP should contract by 2.7%, compared to the previously expected drop of 3.6%. The unemployment rate will drop to 6.7%, not to 7.8%. The risk of another downturn within twelve months has been significantly down.

Dynamics of risk of US economic recession


Source: Wall Street Journal
The forecasts of experts look optimistic, but the pandemic does not end. Jerome Powell warns that the next few months will be tough for the United States and that it is too early to assess the impact of vaccine news on the economy's development. New restrictions can discourage those who think the glass is half full.
If the greenback loses the advantage of growth divergence, it may benefit from underestimating uncertainty. There are more than enough reasons for uncertainty growth. It is not known whether Washington's attitude towards Beijing will soften under Biden. It is unknown if Democrats and Republicans will find common ground over the fiscal stimulus. 58% of Wall Street Journal experts expect the stimulus of $1 trillion -$2 trillion, 29% expect less than $1 trillion, 13% predict a stimulus package of $2.1 trillion -$3 trillion.

Weekly EURUSD trading plan

Therefore, some benefits of the US dollar have exhausted, some still work. That is why the EURUSD trend is not clear. If the pair breaks out the resistance at 1.1845, the bulls should go ahead. On the other hand, if the price goes below the support at 1.176, the bears can take control.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-looks-for-benefits-forecast-as-of-13112020/?uid=285861726&cid=62423
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Euro and ‘fun isolation’. Forecast as of 12.11.2020

Euro and ‘fun isolation’. Forecast as of 12.11.2020
The history repeats. In late spring-early autumn, the S&P 500 pushes the EURUSD up. The same could occur in the rest of 2020. Let us discuss the Forex outlook and make up a EURUSD trading plan.

Monthly euro fundamental forecast

I have often mentioned that the fourth quarter should be similar to the second, although the disaster should be less dramatic. This is evident from economic data, which suggests the current restrictions hit the euro-area economy. However, the damage is far less than it was during the previous lockdown. People continue going to work, manufacturing operates, and the government restricts entertainment and retail trading. The so-called ‘fun isolation’ suggests that vaccines' introduction will allow the euro-area economy to recover soon. This fact lets me hope that the EURUSD correction won’t be deep.
Of course, the ECB would like the euro to cost as little as possible, which will support exports and accelerate inflation. In her recent speech, Christine Lagarde highlighted the effectiveness of the Pandemic Emergence Purchase Program (PEPP) and anti-crisis long-term refinancing operation (LTRO). This was a clear signal that both of them will be expanded in December. On the other hand, the ECB president did not say anything about interest-rate changes. It is quite possible that by increasing the scale of QE, the ECB will cause the same reaction in EURUSD as the Bank of England did by its similar actions. Remember, the pound rose in response to the BoE monetary easing in November.

Dynamics and structure of ECB assets


https://preview.redd.it/g309gkp0cty51.jpg?width=576&format=pjpg&auto=webp&s=a7f25d34d6feb075e8e00e412ac7f07fe94005c9
Source: Bloomberg
But still, the primary growth driver for the EURUSD is not the liquidity trap suggesting lower efficiency of the stimulating measures as their volumes increase and inadequate response of the regional currency. That is the rally of the US stock indexes, which supports the euro. Yes, the S&P 500 growth on November 9 unexpectedly supported the dollar. But this situation resulted from the realization of the investment idea of Biden’s victory in the US presidential election. The correlation between the US stock market and the EURUSD should soon restore, which could encourage the euro bulls to go ahead.
The record stimuli as the response to the recession have poured a huge amount of money into the financial system. Ahead of the elections, investors preferred to hold cash because of uncertainty. Now, that money goes back into the market. Amid positive news about vaccines, the S&P 500 rallies thanks to traditional industries, including industry and banking. As soon as there are talks about a long vaccine introduction process, the stock market is still rising. This time thanks to the tech stocks.

Monthly EURUSD trading plan

The current situation looks like that of the second quarter when the US and the euro-area economies slid down into recession, and the S&P 500 was growing. Investors expected the recession to end soon, and the GDP recovery to be V-shaped. The same is now. It will take a long time to introduce the COVID-19 vaccine after it has been approved. However, the stock indexes are rallying up, suggesting purchases of the EURUSD if the price closes above 1.18 and 1.1845. Otherwise, the US stock market correction will send the euro down to $1.172 and $1.167.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-and-fun-isolation-forecast-as-of-12112020/?uid=285861726&cid=62423
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Dollar smiles again. Forecast as of 11.11.2020

Dollar smiles again. Forecast as of 11.11.2020
While the EURUSDbulls wonder why the price isn’t rising, the bears see the reasons for a deeper correction. What’s next? Let us discuss the Forex outlook and make up a EURUSD trading plan.

Monthly US dollar fundamental forecast

It is impossible to predict market trends. The market is unpredictable; it can always surprise us. The EURUSD bulls are surprised because the pair doesn’t grow. There should be several reasons for the euro growth. Joe Biden has won the US presidential election; there is positive news about the COVID-19 vaccines. Investors should have started selling the dollar. However, the greenback remains strong, encouraging traders to buy the USD.
Jefferies notes that the USD closed in the red zone six months out of the last seven, having been down by 11%. The dollar’s surge on November 9 proves that most of the negative had been priced in the quotes, and the greenback will hardly start falling now. The central bank in Europe and Asia, which compete with the Fed, are willing to provide an extra monetary stimulus, which is a bearish factor for their local currencies. Jefferies sees the EURUSD falling to 1.14 as the dollar smile theory is popular again. It suggests the USD should strengthen at the final, third stage of the economic cycle because the US GDP outperforms the global peers.
Even though the next two quarters, according to the President of the Federal Reserve Bank of Dallas Robert Kaplan, will be tough for the US, it should demonstrate robust growth in 2021. Unlike Europe, the USA does not impose a lockdown, and the restrictions introduced in the euro-area countries are costly. For example, each month of helping businesses and workers in Italy affected by COVID-19 will cost Rome €10 billion. If the restrictions last through March, it will cost €40 billion - €50 billion, or 3% of GDP. Furthermore, the PMIs and other indicators are falling, which is confirmed by a decrease in the ZEW Indicator of Economic Sentiment for Germany to the lowest level since April.

Dynamics of German economic sentiment index


Source: Bloomberg
The epidemiological situation in the euro area deteriorates. The ECB estimates that one in seven workers in Spain is associated with a business at risk of collapse, which compares with 8% of employees in Germany and France, and 10% - in Italy. The divergence in economic growth is in favor of the USA, which presses down the EURUSD.
And what about Biden’s victory and coronavirus vaccines? I believe the first driver has already worked out, which is evident from the euro drop on November 9. There is still much uncertainty around vaccines. Nobody can say how quickly they will be introduced and how long the immunity will last. The market needs time. The US stock indexes could be overvalued and will be unstable in the next few weeks. Besides, the positive news about COVID-19 vaccines will give Republicans a reason to delay or adopt a smaller fiscal stimulus than previously anticipated.

Monthly EURUSD trading plan

The euro should be strong in the long-term outlook, but it should weaken in the short term. Under such conditions, one could buy the EURUSD at the breakout of the resistance at 1.192. It will be relevant to sell the euro-dollar if the price breaks out the support at 1.179.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-smiles-again-forecast-as-of-11112020/?uid=285861726&cid=62423
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Yen places its opponent in check. Analysis as of 04.11.2020

Yen places its opponent in check. Analysis as of 04.11.2020

Monthly fundamental forecast for yen

While the greenback is waiting for the election's final results, trading currency cross rates may be worth considering. The US political landscape will undoubtedly affect most currencies, but the pandemic remains a weightier factor in Forex pricing in the medium and long terms. The strategies based on the divergence in epidemiological situations, economic growth, and monetary policies continue to yield profits. Another confirmation is the realization of the targets at 122.9 and 121.8 set in mid-October for shorts in the EURJPY.
COVID-19 hit Japan less than the eurozone: in terms of Coronavirus cases per 100,000, Japan is one of the countries that tackle the pandemic most efficiently, along with China, Taiwan, and South Korea. The situation in Belgium, Spain, and Italy looks gloomy, on the contrary.

Recession and pandemic


Source: Financial Times.
As a result, Europe is forced to introduce new restrictions, which will cut the eurozone's Q4 GDP by 2.3%, according to Financial Times. Thus, a double recession is certainly in the air. The organization of economic development and cooperation expects that the currency block's economy will reduce 7.9% in 2020, i.e., twice as much as during the previous global crisis. I dare suppose that the second wave may even downgrade those forecasts.
The BoJ expects that the Japanese GDP will fall by 5.5% by the end of the 2020/2021 fiscal year in March. Japan's economic loss doesn't look as significant as the eurozone's since the efficiency of anti-pandemic measures in Asia is higher than in Europe.

GDP dynamics

Source: Financial Times.
Christine Lagarde is sure the ECB will expand a monetary stimulus package in December as the coronavirus is spreading fast across Europe. Haruhiko Kuroda and his colleagues are ready to take action if necessary, but the BoJ's Head has not seen such a necessity so far. Both regulators got caught in a liquidity trap where softer monetary policies do not have any positive effect. Both agree to play currency wars, but the ECB's intentions are manifest, and the euro is therefore falling faster than other G10 currencies.

Monthly trading plan for EURJPY

The situation may seriously change soon: vaccines' development will support the global economic recovery and international trade, which is positive news for the euro. The European countries will lift restrictions, and Christine Lagarde's hints about QE expansion will remain mere hints. According to Governor of the Austrian National Bank Robert Holzmann, there is no point in increasing buy volumes as the inflation won't speed up anyway. Instead, a change in the QE program's structure must be in focus.
This scenario looks too optimistic, though. But why not hope for the best and use the EURJPY's drawdown to 120.65 for long-term buying?
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/yen-places-its-opponent-in-check-analysis-as-of-04112020/?uid=285861726&cid=62423
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Will Aussie repeat the hat trick? Forecast as of 03.11.2020

Will Aussie repeat the hat trick? Forecast as of 03.11.2020
The second quarter is likely to be the same as the second one. However, the disaster is not going to be so dramatic. If so, we have a pattern to trade the AUDUSD. Let us discuss the Australian dollar outlook and make up a trading plan.

Monthly Australian dollar fundamental analysis

What doesn't kill makes one stronger. The RBA’s monetary expansion should have crashed the Australian dollar. RBA not only cut the cash rate down to the all-time low of 0.1% but also boosted the purchases of assets with a maturity of 5-10 years within QE by AU$100 billion. The RBA has become one of the first to react to the second pandemic wave. However, the AUDUSD, instead of falling, surged up to the bottom of figure 71. Bloomberg experts anticipate such measures of the regulator, and the time for maneuver was not right. It is not wise to ease monetary policy on the day of the US presidential election, is it?
According to Philip Lowe, the increase of the QE size will support economic recovery amid lower costs of funding and exchange rate, as well as higher assets’ price than it would be in the opposite case. RBA must have tried to improve financial conditions, as the Fed did. It was one of the reasons for the US economic growth in the third quarter. In the fourth quarter, the US GDP should face a downturn because of the difficult epidemiological situation. Australia, on the contrary, has coped with the coronavirus through a strict lockdown in Victoria. So, Australia’s GDP can well go up.

Dynamics of COVID-19 cases in Australia


https://preview.redd.it/z0b18quhc0x51.jpg?width=629&format=pjpg&auto=webp&s=ed290b23768a625aba0bb3c0a891f975388ab309
Source: Trading Economics
According to the RBA forecasts, Australia’s GDP in the 2020/2021 financial year will expand by 6%, in 2021/2022 - by another 4%. The forecast for the unemployment peak has been cut from 10% to 8%. The core inflation will grow by 1% in 2021, and by 1.5% in 2022.
In addition to the domestic positive factors, foreign news also supports Aussie. Despite the disputes between Australia and China, which imposed tariffs on Australian barley, launched an anti-dumping investigation into Australian wine, and suspended imports of coal and lobsters from Australia, I believe that the trade relationships will be improved. China is the largest market for Australia. China’s economic growth by 1.9%, according to the IMF forecast, will support the AUDUSD bulls. Based on the yuan price changes, the AUDUSD looks undervalued.

Dynamics of AUDUSD and USDCNY


https://preview.redd.it/mqvioyaic0x51.jpg?width=634&format=pjpg&auto=webp&s=8db6d6a5debdaf671ce4902ce6fc43f2960f4ebb
Source: Trading Economics

Monthly AUDUSD trading plan

In general, market sentiment indicates that the fourth quarter for the global economy will be similar to the second one, although the disaster scale will be smaller. If so, we have a pattern to trade the Aussie. In late March, I recommended buying the Australian dollar in the range of $0.59-$0.62 amid the expectations of the V-shaped recovery of China’s economy, and this trading idea was winning. Now, there is another chance to repeat the hat trick provided that Joe Biden wins the election.
Biden also promises to attack China for its economic and human rights violations, the US-China relations are going to improve. As a result, the entire Pacific region will benefit. Australia, with its successful COVID-19 strategy, is no exception. If Biden wins, buy the AUDUSD with targets at 0.729 and 0.733.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/will-aussie-repeat-the-hat-trick-forecast-as-of-03112020/?uid=285861726&cid=62423

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Dollar rocks on the waves. Analysis as of 28.10.2020

Dollar rocks on the waves. Analysis as of 28.10.2020

Weekly fundamental forecast for the dollar

The fear of coronavirus makes US stock market bulls retreat, which results in the US dollar’s consolidation. The number of new cases hits a record high in the USA. The US also reported record high hospitalization rates since 19 August, while France recorded the highest daily death toll since April. Emmanuel Macron is rumored to introduce another lockdown. That dropped the EURUSD quotes below the bottom of figure 18. The fall might have been deeper if not for expectations of the Democrats’ victory on 3 November.
According to 75% of 59 Reuters experts, a blue wave will be the best option for the US economy. It will help the fiscal stimulus package worth $1.8 trillion pass easily through Congress. Experts forecast that the US GDP will draw down 4% in 2020 and expand 3.7% and 2.9% in 2021-2022, respectively.

Reuters survey: What will support the US economy?

Source: Reuters.
A blue wave and post-election reduction in political uncertainty suggest that volatility may fall. That’s good news for S&P 500 and bad news for the greenback. The world’s largest financial manager BlackRock, which manages assets worth $7.3 trillion, thinks that the USD will be moderately weak for 1-3 years. The giant joints USD bulls, such as Goldman Sachs and UBS. Its position explains why hedge funds are selling out dollars in the forward market.

USD index and speculative positions in USD


Source: Bloomberg.
Uncertainty feeds the dollar. The markets seem to know already the presidential election’s results. The election factor excluded, the second wave may drop EURUSD quotes significantly. We may face the global economy’s double recession and another collapse of the S&P 500 and the greenback’s hike like it was in March. All the previous achievements will be canceled. Few are those who will remember the housing prices’ growth in the USA and the fifth consecutive month of increase in US durable goods orders.

US durable goods orders


Source: Bloomberg.
At first sight, the second pandemic wave must push the ECB to active actions as early as at the 29 October meeting. However, QE expansion won’t solve the COVID-19 issue. European banks stop crediting, fearing bad debt growth. So, Christine Lagarde’s main task is to calm down financial markets. A hint about an additional stimulus in December may help with that task.

Weekly trading plan for EURUSD

Thus, the pandemic returned to Forex’s forefront and consolidated the USD. However, I think it’s still possible to exploit the factor of Joe Biden’s victory in the short term. The EURUSD’s retracement from support at 1.1745 or return to 1.1815 and higher may be a signal to open long positions for impatient and adventurous traders.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-rocks-on-the-waves-analysis-as-of-28102020/?uid=285861726&cid=62423
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Euro: slow start and fast drive. Analysis as of 27.10.2020

Euro: slow start and fast drive. Analysis as of 27.10.2020

Weekly fundamental forecast for euro

There are a few reasons for the EURUSD’s drop to the bottom of figure 18: the US stock indexes’ fall amid loss of faith in fiscal stimuli and record-high growth of new cases in the USA; disappointing macrostatistics in Germany, and fears that the ECB may expand QE as early as in October. Investors were expecting the second wave of COVID-19, but they didn’t know it would come so fast. The record high growth of new cases in the USA, France, and Russia, the introduction of new restrictions, and emergency announcements in some European countries made the S&P 500 fall by 1.9%. The German DAX went further and dropped 3.7 %, drawing the euro down too.
The increase in new coronavirus cases in Germany provoked the Ifo’s Business Climate Index’s fall, the first in six months. It’s a bad signal about an eventual slump after a 6-month recovery. Growing risks of a double recession and reflation may urge the ECB to expand QE by €500 billion already on 29 October, in contrast to the Bloomberg experts’ bet on December. That will be an unpleasant surprise for EURUSD bulls.

German business climate index


Source: Bloomberg.

ECB bond-buying dynamics

Source: Bloomberg.
The States look preferable to the eurozone, which lost illusions about fast recovery. Three months ago, Bloomberg surveyed economists forecast that the US GDP would grow 18% in Q3. The estimate rose to 31.8% by the publication date against a backdrop of a large fiscal stimulus as a faster-than-expected removal of restrictions. If the fiscal stimulus isn’t extended, the US double recession chance will be as big as in Europe.
The market doesn’t believe in any extra support before the elections and has already started to doubt that the issue will be resolved after 3 November as a blue wave is becoming less likely. That results in the S&P 500’s fall, which contradicts history. Since 1928, the stock index has closed in the green zone in the week before the presidential election. If we take a Tuesday to Friday period, the indicator will increase by up to 91%. Thus, the week's bad start isn’t as bad a signal for the stock market and the euro.
Not only will Joe Biden’s victory inspire S&P 500 bulls, but it will also reduce the risk of a trade war resumption, the reason for which may be China’s slow execution of its obligations under January’s agreement. According to Bloomberg, China has bought $65.5 billion in US goods, while the agreement is $170 billion.

China’s fulfillment of trade obligations


Source: Bloomberg.
The Democrats’ victory will weaken the US protectionism and allow the global trade to breathe deeply. That’s good news for the export-oriented eurozone and its currency.

Weekly trading plan for EURUSD

S&P 500’s fall on 26 October should be interpreted as market noise. The story is likely to repeat itself, and the stock index will close in the green zone in the last week before the election.
The strategy for the EURUSD remains the same. Buy at a breakout of resistance at 1.1865.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-slow-start-and-fast-drive-analysis-as-of-27102020/?uid=285861726&cid=62423
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Aussie is a new victim of China. Forecast as of 13.10.2020

Aussie is a new victim of China. Forecast as of 13.10.2020

Monthly Australian dollar fundamental analysis

Sometimes, the Predator turns into the Prey, and the Prey, on the contrary, becomes the Predator. During the time of the US-China trade wars, the US looked as an aggressor attacking a victim, which was China. China couldn't adequately retaliate. US import tariffs pressed down China’s exports while selling off China’s Treasury stocks would hardly have been that effective. China was afraid of capital outflows, so it had to make concessions. Now, the victim has recovered and is looking for prey among weaker countries.
Financial Times, referring to the sources familiar with the matter, reports that Chinese power stations and steel mills have been verbally told to immediately stop using Australian coal. Coal is one of the primary components of Australia’s exports. China seems to be a vindictive country. It hasn’t forgiven Australia for the allegations to the COVID-19 laboratory origins, expressed a few months ago. The prey turned out into a predator. Will China continue retaliatory measures against Australia?
This time, Canberra has nothing to respond with. The share of Australia’s exports to China is about 40%, China’s exports to Australia are less than 2%. The trade war hasn’t yet started, but there is already the winner. The problems with the Australian coal exports and the yuan’s drop started an AUDUSD correction down. The AUD bulls used to seem invincible before. Australia’s economy was supported by several factors. The iron ore prices rose. China’s economy, being one of the key trade partners of Australia, was recovering rapidly.The AUDUSD rose by 31% from the low hit in March.

Dynamics of AUDUSD and iron ore prices


Source: Bloomberg
The AUD rise resulted from the rapidly growing US stock indexes and the global economic recovery in the third quarter. However, the AUDUSD rally will continue so fast in the next six-nine months. China’s PMI slows down, the US epidemiological situation is still difficult, the euro area faces the second wave of the COVID-19 pandemic. Furthermore, China attacks Australia, so it is natural that Aussie buyers are discouraged. The median gauge of Bloomberg’s experts for the AUD is $0.72, which corresponds to the current levels.
Nonetheless, there are always two currencies in a currency pair. According to Goldman Sachs, a ‘blue wave’ in the USA (Democrats take control of both the White House and the Congress after the election on November 3) and positive news about the coronavirus vaccines should send the USD down to the lows recorded in 2018. UBS and Invesco share a similar opinion. They recommend their clients to sell the dollar as Joe Biden’s rating grows. Hedge funds seem to follows such ideas.

Dynamics of USD and US dollar speculative positions


Source: Bloomberg
Monthly AUDUSD trading plan
I believe Beijing and Canberra will solve political problems, the yuan will resume its rally, and the Democrats will win in the elections. In this scenario, it is still relevant to buy the AUDUSD on the corrections down. The medium-term targets are at 0.745 and 0.762.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/aussie-is-a-new-victim-of-china-forecast-as-of-13102020/?uid=285861726&cid=62423
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Dollar is set back by euphoria. Forecast as of 09.11.2020

Dollar is set back by euphoria. Forecast as of 09.11.2020
Investors continue trading the idea of Joe Biden becoming the president. That is why the S&P 500 features the best weekly rise since April and pushes the EURUSD up. How long will it continue? Let us discuss the Forex outlook and make up a EURUSD trading plan.

Weekly US dollar fundamental analysis

Euphoria rules the market. Investors forgot about both COVID-19, the US fiscal stimulus's unsettled issue, and Donald Trump rejecting the voting results. Traders are satisfied with the less uncertainty around Joe Biden’s policy, hoping for lower volatility. Analysts suggest that the divided Congress won’t allow Biden to carry out radical reforms in tightening taxation and regulation of technology companies. As a result, the S&P 500 grew by 7.3% in the first week of November, and the USD dropped to the lowest level since early September.
How long will the euphoria last? History proves that starting from 2000, if the S&P 500 was growing on election day, it continued growing in November and December. The first years of presidential terms were also favorable for the US stock indexes. The S&P 500 grew by 18.6% on average. However, the stock indexes’ trends during the time of the divided Congress, which prevented the White House from carrying out radical reforms, were controversial. During 45 years, starting from 1928, when one party controlled the US government, the stock market rose at an average rate of 7.46% annually, up from 7.26% in 46 years when the power was divided.

Reaction of S&P 500 to the political situation in USA


Source: Wall Street Journal
In my opinion, the markets are going too fast. Investors want to join the stock market’s uptrend, forgetting about the negative. However, are some negative factors that should have their effect. First, political uncertainty continues. Donald Trump is challenging the election results. Because of the second round of voting in Georgia, we will know the partisan makeup of the U.S. Senate only on January 5. It creates obstacles to the agreement on the new fiscal stimulus. Until a fresh stimulus is provided, the US economy will be slowing down, which presses down both the global GDP and the risk appetite.
Second, the coronavirus vaccines haven’t yet been developed, and the COVID-19 pandemic continues in the USA and in the euro area. The numbers of new coronavirus cases, hospitalizations, and deaths are hitting all-time highs, so investors’ optimism is surprising. The epidemiological situation in Europe is deteriorating. France, Germany, and other countries are locked down. This fact suggests that the divergence in the economic growth and monetary policy is in favor of the EURUSD bears.
Finally, the U.S. dollar may not be falling amid the growth of the S&P 500. The negative correlation between stocks and the USD is the strongest at the time of uncertainty, also because of the US presidential election. Once uncertainty eases, the negative correlation should stop working.

Weekly EURUSD trading plan

Euphoria rules the market, but it can’t last for long. If the EURUSD bulls fail to hold the price above 1.188, the pair should roll down to 1.183 and 1.1785. Otherwise, if the resistance is held up, the euro could continue the rally up to $1.195-$1.196 and even $1.2. Next, large traders should take some profits and exit the longs.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-set-back-by-euphoria-forecast-as-of-09112020/?uid=285861726&cid=62423

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Pound escaped from the scaffold. Forecast as of 29.09.2020

Pound escaped from the scaffold. Forecast as of 29.09.2020
It seemed that Boris Johnson should have crashed the sterling by the domestic market bill. But it was only a part of the plan. Let us discuss the pound prospects and make a GBPUSD trading plan.

Fundamental Pound forecast for this week

How to make a nation happy? Ruin the hopes for the bright future and bring them back. The UK domestic market bill, which allows canceling some paragraphs of the EU-UK deal signed last year, could have ruined the last hopes for a Brexit deal. The UK has created problems itself and was going to face new tariffs after December 31, which would hit the UK economy, already weak. Fortunately, the chance to sign the EU-UK trade deal has increased, and the pound is strengthening.
All or nothing. The final round of the EU-UK talks should clarify the situation, also for the sterling future trend. The progress suggests moving into the next stage of the “tunnel” negotiations to allow both sides to discuss detail and present the draft deal at the EU summit in mid-October. Otherwise, if the negotiations fail, the chance of a no-deal Brexit will surge. The pound traders are preparing for the market turmoil, as the GBP will be somewhat responsive to any news about Brexit talks. The EU’s chief negotiator, Michel Barnier, told there was “a more open atmosphere at the negotiating table.” Moreover, Bloomberg’s source familiar with the matter suggests that the EU will demand the withdrawal of specific provisions on the UK internal market bill in exchange for concessions. The GBPUSD bulls went ahead and sent the rate above the top of figure 29 for a while.

Reaction of pound to positive information about Brexit


Source: Reuters.
If the Brexit deal is signed, Boris Jonson’s game will be useful. The UK often exaggerates the crisis scale to fuel the positive news after the problem is solved. If so, the BoE will have no reasons to cut the interest rates below zero. Expectations for the BoE rate cut were one of the drivers for the sterling’s drop in September. Some BoE officials, including Andrew Bailey and the deputy Governor Dave Ramsden, say there is no need for negative rates. Their opponents, including Silvana Tenreyro, note that in other countries, the banking system has adapted to similar monetary policy.
We shouldn’t deceive ourselves about the positive influence of the UK fiscal stimulus on the pound rate. According to Goldman Sachs, the new financial aid package won’t save the UK labor market form either the loss of another 2.2 million jobs or the unemployment growth to 9%, which is two times more than the current level.

GBPUSD trading plan for the week

Brexit and nothing else will determine the sterling trends for the near future. The progress in the Brexit talks encourages the GBPUSD bulls. Pound volatility should be very high during the week through October 2. If the UK-EU talks succeed, the price could hit 1.33. If the pound buyers break out the resistance at $1.2925-$1.293, it may be a signal to buy the GBPUSD. There must be a stop loss, as the lack of progress could send the pair towards 1.2.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/pound-escaped-from-the-scaffold-forecast-as-of-29092020/ ?uid=285861726&cid=62423
submitted by Maxvelgus to Finance_analytics [link] [comments]

Dollar is following its heart. Forecast as of 06.11.2020

Dollar is following its heart. Forecast as of 06.11.2020

Weekly US dollar fundamental analysis

Markets are just like people. They follow their hearts from time to time and forget about common sense. Investors like the idea of the division in the Congress and the Democratic president. In this scenario, the risks of tax hikes and high tech companies' strict regulation are much lower. This fact supports the stock indexes. The S&P 500 has been up by 1% and more during four consecutive trading sessions, which has been for the first time since 1982. In percentage terms, those days have been the best since early April. Markets consider Joe Biden to be a better president than Donald Trump, which allowed the yuan to gain back more than 50% of the losses faced during trade wars. The EURUSD tested the resistance at 1.186-1.187.
The growing chance of Biden’s victory encourages investors to spend the cash, which they have been accumulating ahead of the US presidential election. They are buying stocks and bonds. However, traders forget about other factors, such as the pandemic, uncertainty around the new fiscal stimulus, and Donald Trump’s willingness to reject the voting results. It looks like an attempt to give out desirable for valid. According to TD securities, there should not be any concerns about challenging the voting results, which has pushed the risky assets up and weakened the US dollar. DZ Bank believes that the greenback is falling because the voting results were reported earlier than some had expected. I do not think the above arguments to be strong.
I suppose traders are following their hearts. They invest the capitals in the securities as they worry not to miss the uptrend, which sends the S&P 500 up, fuels global risk appetite, and weakens the US dollar against a basket of currencies.

Dynamics of world's currencies versus the US dollar


Source: Financial Times
How long can it be going on? It depends. People in love are passionate during different periods. However, common sense should win sooner or later. The USA performs better than the euro area at the current stage of the economic cycle. The Fed is not willing to boost the monetary stimulus while the ECB tends to increase the current QE pace. According to Bloomberg’s leading indicators, the largest euro-area economies face a deeper drawdown in the PMIs because of the new lockdowns. The euro-area bond yields fall, which signals that the markets expect the ECB to take active measures in December.

Recovery of the world’s economies


Source: Bloomberg

Yields on the euro-area bonds


Source: Wall Street Journal

Weekly EURUSD trading plan

Let us be sensible during times of euphoria. Although the EURUSD has rebounded from the resistance at 1.186, the shorts entered in the zone seem vulnerable. It will be relevant to hold down the shorts if the pair goes below the support at 1.179. The S&P 500 rally could push the euro up above $1.188. The EURUSD medium-term outlook depends on whether the bulls can hold the price above 1.188.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-following-its-heart-forecast-as-of-06112020/?uid=285861726&cid=62423
submitted by Maxvelgus to Finance_analytics [link] [comments]

Dollar caught a fish in dark waters. Forecast for 02.11.2020

Dollar caught a fish in dark waters. Forecast for 02.11.2020
The primary risk associated with the US presidential election is a possible election-related dispute. Furthermore, there are divergences in monetary policy and economic performance. So, the EURUSD is expectedly down. Let us discuss the Forex outlook and make up a EURUSD trading plan.

Weekly US dollar fundamental forecast

October has become the worst month for the US stock market since March. The bond market has experienced the worst drop since September 2018. In the last week of October, the S&P 500 sank 5.6%, while the Treasury yield rose to 0.858%. According to Bespoke Investment Group, this has only been 17 times since 1962, when the US Treasury yields rose along with the stock indexes’ drop. Investors believe that Joe Biden’s victory will result in the fiscal stimulus boost provided that the Democrats take control over the Senate. If it doesn’t happen, the extra stimulus package will hardly be accepted by Congress. Is it better to buy currencies, selling stocks and bonds?
The S&P 500 bulls hope for a “blue wave.” However, it doesn’t guarantee that the stock index will resume the uptrend. In 2016, the Wall Street experts predicted the US stock market to fall in case of Donald Trump's victory. At first, everything was going on as expected, but the stock indexes quickly recovered afterward. A wrong forecast cost George Soros $1 billion. And not only him.
Nobody wants to repeat the same mistakes, especially since the S&P 500 could continue correction, no matter who wins. The main source of uncertainty is Donald Trump’s willingness to challenge election results. As of October 31, nearly 90 million Americans already have cast their ballots, which is over 65% of the total votes from 2016. Donald accuses the Democrats of election fraud.
Uncertainty makes investors buy safe-haven assets. However, when the Treasuries are being sold off, investors tend to buy the US dollar. Besides, the growing yield-gap between U.S. and German government bonds sends the EURUSD down as well.

Dynamics of U.S.-Germany 10-year yield gap


Source: Bloomberg
Investors are selling the euro off amid the increase in the number of COVID-19 cases in Europe and the introduction of new restrictions by the euro-area governments. Although the euro-area economy grew by 12.7% and outperformed the U.S. growth in the third quarter, everything can radically change in the fourth quarter. The median estimate of 18 Financial Times experts suggests that the euro-area GDP will contract by 2.3% in October-December. At the same time, Oxford Economics predicts that the United States will expand by 3% over the same period. Divergence in economic growth sends the EURUSD down. Furthermore, there is also a divergence in monetary policies.

Dynamics of GDP


Source: Wall Street Journal
The ECB is willing to boost the monetary stimulus in December. 59% of analysts surveyed by Bloomberg believe that the Fed, on the contrary, won’t expand the assets purchases until the end of 2021. Working directly with the Federal Reserve, large banks do not expect any QE changes until the middle of next year.

Weekly EURUSD trading plan

Under such conditions, the EURUSD is likely to continue falling towards 1.16 and 1.154-1.156. The absence of the “blue wave” and/or Donald Trump’s rejection of the election results will suggest a deeper correction down.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-caught-a-fish-in-dark-waters-forecast-for-02112020/?uid=285861726&cid=62423
submitted by Maxvelgus to Finance_analytics [link] [comments]

The dollar spoiled it all. Forecast for 29.10.2020

The dollar spoiled it all. Forecast for 29.10.2020

Fundamental forecast for dollar for today

Donald Trump risks being remembered as a person who spoiled everything. He inherited a record-long employment growth streak, but in September, the indicator lacked 10.7 million people to equal February's values. He got a weak dollar and tried to make it even weaker to support US exporters. But in fact, the USD index has consolidated by 18% since Barack Obama's 2008 victory. Trump wanted to do his best to slow down China. Instead, he approached the moment when China's economy will outperform the US' one due to the difference in pandemic management approaches.
It's not surprising that ordinary Americans and financial markets have changed their attitude to the current president. He's losing to Joe Biden, and the S&P 500's fall on the eve of the election indicates the Republican's eventual defeat. According to Strategas Research Partners' study, the stock market has predicted election results right 20 out of 23 times since 1928. If it was growing one week before the elections, the party in power's candidate won in 86% of cases.

Trump's and Biden's ratings


Source: Financial Times.
The drowning Trump is catching at a straw. He says US GDP can grow over 30% in Q3, but obviously, the economy risks slowing down in Q4 amid fiscal stimulus exhaustion and epidemiological state worsening. According to Oxford Economics, the slowdown may go down to 3%.
Fears of the S&P 500's another collapse result in the US stock market sales and the USD consolidation. Investors consider the upcoming election to be the most uncertain ever, even more so because the White House current tenant may not recognize the results. One month ago, markets were sure restrictions would be targeted, yet they face a different picture in October.
The sharp growth of new cases in Europe forced Germany and France into closing bars, restaurants, and other service sector businesses. According to Bloomberg, that will cut French Q4 GDP by 0.8-2%.

COVID-19 cases in Europe


https://preview.redd.it/on6m9enan0w51.jpg?width=572&format=pjpg&auto=webp&s=999337fd49d52666d2e7cf67280f281306884fc4
The eurozone may face a double recession faster than the US, and the economic growth divergence is advantageous to EURUSD bears. The current correction now looks reasonable, and even more so because the pandemic's spread urges on the ECB. Bloomberg's experts expected the ECB would expand QE in December, but now no one can tell for sure it won't do that on 29 October.

Trading plan for EURUSD for today

Fundamentally, the main currency pair's pullback is quite logical. However, it's surprising that the market isn't trying to exploit the factor of Joe Biden's victory. The EURUSD's rally in the next 5-7 days, followed by a sudden reversal, would be an optimal scenario. The bulls still can do some fighting if the quotes rise above 1.179-1.18 against a backdrop of the ECB's meeting.

For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/the-dollar-spoiled-it-all-forecast-for-29102020/?uid=285861726&cid=62423
submitted by Maxvelgus to Finance_analytics [link] [comments]

Dollar is afraid of risk on steroids. Analysis as of 26.10.2020

Dollar is afraid of risk on steroids. Analysis as of 26.10.2020

Weekly fundamental forecast for dollar

The pandemic revealed the drawbacks of the eurozone’s two-speed economy. While Germany’s business activity grew, mainly due to the industrial sector, the currency bloc’s composite Purchasing Managers Index dropped to 4-month lows at 49.4. When that value is less than the key level of 50, the economy falls. Thus, the eurozone may face a double recession against the backdrop of the second wave of COVID-19. That allows selling EURUSD amid the US business activity’s continuous growth. Unfortunately, the market is overwhelmed with quite different investment ideas. At least for now.

Business activity


Source: Wall Street Journal.
Bank of New York Mellon notes that the correlation between currencies and the US stock indexes is significantly higher than in 2019. That allows us to presume their increased sensitivity to risk appetite. The bank interpreted that unusual occurrence as “risk on steroids”: the markets are waiting for Joe Biden’s victory, the S&P 500’s rally, and the greenback’s dive, which will affect dollar pairs and cross rates.
The USD is under serious pressure, but the euro itself has some trumps. There is too much spare cash in the eurozone’s bank system amid large monetary stimuli. The index reached a record high level of €3.2 trillion in October. As there’s too much spare money, it goes to the debt market: demand for the European Commission’s first bonds was €233 billion while the issuance volume was €17 billion. Since the ECB has already got a large piece of the pie by means of its pandemic-driven bond-buying program, the remaining part is fiercely contended for.

Spare liquidity in European bank system

Source: Bloomberg.
Central banks are interested in buying bonds too: according to Deutsche Bank’s research, their share in the volume of 10-year bond issuance was 40%, two times bigger than previous issuance values. Diversification of gold and currency reserves in favor of the euro is one of the key factors in the EURUSD’s consolidation.
The ECB will hardly decide to expand QE in the current circumstances at the meeting on 29 October. It doesn’t need to hurry in spite of the pandemic’s second wave, deflation, Brexit, and double recession risks. The CPI’s fall below zero may be due to temporary factors, such as Germany’s VAT cut. The program’s unused resources amount to $750 billion, whereas economic forecasts will be updated only in December. There are plenty of arguments to continue to “idle on the roadside,” but Christine Lagarde can still surprise us.

Weekly trading plan for EURUSD

If not for the ECB’s meeting and the fiscal stimulus story, we could buy EURUSD at the breakout of resistance at 1.1865 amid expectations of Joe Biden’s victory, then fix profits after 3 November and sell the pair amid the divergence in the US’ and the eurozone’s economic growth. However, other factors may interfere with that plan. The last week of October promises to be wild.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-afraid-of-risk-on-steroids-analysis-as-of-26102020/?uid=285861726&cid=62423
submitted by Maxvelgus to Finance_analytics [link] [comments]

EUR/USD forecast: Euro doesn’t believe its luck

EUUSD forecast: Euro doesn’t believe its luck

Fundamental euro forecast for today

EUUSD bulls do not believe Christine Lagarde’s optimism

ECB is monitoring the euro exchange rate, but it is not willing to start a currency war now. Christine Lagarde expressed optimism about the euro-area economic recovery, the ECB president hasn’t signaled the further monetary easing in the near future. Lagarde’s speech should have encouraged the EUUSD bulls, but they didn’t believe the good news, so they didn’t go ahead. It looks like a catch. The ECB officials express concerns about the euro strengthening ahead of the Governing Council meeting, and, next, the ECB president sounds hawkish.
At the press conference, Christine Lagarde several times stressed that exchange rates and the euro appreciation were not the ECB policy target. However, the exchange rate was the most discussed topic at the Governing Council meeting in September. According to a Reuters source familiar with the matter, the ECB officials have agreed that the EUUSD rally resulted from a faster economic rebound in the euro area compared to the US growth, the Fed’s easy monetary policy, the increased confidence in the currency bloc due to the management of the pandemic fallout. Moreover, the upcoming presidential election in the US weighs on the US dollar. Bloomberg’s leading indicators signal that the GDP recovery is the fastest in Germany. After a temporary downturn in France, Italy, and Spain on concern about the second wave of the COVID-19 outbreak, the economic activity is gradually increasing. The UK, US, and Canada persistently lag behind.

Dynamics of the economic recovery


Source: Bloomberg
Four sources on the ECB's Governing Council told Reuters that the ECB acknowledges the negative effects of the euro's strength on inflation and growth, but the central bank is not willing to start a currency war. Speaking after the meeting, two sources said they saw $1.20 as not far from the equilibrium exchange rate at present. According to Citigroup, if the EUUSD is up by another 5%, the European Central Bank will take active measures. In the meanwhile, the regulator is carefully monitoring the exchange rates of the regional currency. The Governing Council policymakers at the meeting considered adopting the language used to stem the euro's previous rally, in early 2018, when the former ECB President Mario Draghi described "volatility in the exchange rate" as "a source of uncertainty", according to Reuters.
The Reuters sources say the southern countries of the eurozone are much more concerned about the euro strengthening than the northern ones. The Governing Council hawks wanted Lagarde to note the great progress in the euro-area economic recovery. François Villeroy de Galhau, the governor of the French central bank, insisted on this especially strongly.
So, the EUUSD bulls feared verbal interventions, signals of monetary easing, and the ECB willingness to follow the Fed’s example and target the average inflation. None of the fears came true. However, the euro hasn’t consolidated above $1.19. Are the buyers so weak? Or, they could feel a catch and will resume attacks after the ECB officials’ speeches. I suppose both scenarios should be considered. If the euro rises above $1.192, it will be relevant to buy. If it slides down below the support levels of $1.1795 and $1.1765, we should sell the euro versus the dollar.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/eurusd-forecast-euro-doesnt-believe-its-luck/?uid=285861726&cid=62423
submitted by Maxvelgus to Finance_analytics [link] [comments]

Euro follows rouble's example. Forecast for EURUSD for 21.10.2020

Euro follows rouble's example. Forecast for EURUSD for 21.10.2020
The European Commission’s first issuance of bonds as part of common debt and the capital flow to the European markets support EURUSD bulls. Let’s discuss that and make a trading plan.

Fundamental forecast for euro for today

Money controls the world. Everything seems to be against the euro: the second wave of COVID-19 in Europe, the S&P 500’s retracement, the worsening of the eurozone’s economy and the ECB’s hints at monetary policy softening. Nevertheless, the EURUSD jumps up like a scalded cat. If the reason is the Chinese yuan that has reached its 27-month high against the USD, then why aren’t the Australian and the NZ dollars consolidating? Australia’s and New Zealand’s shares in Chinese exports are higher than the eurozone’s one. As it turns out, it’s carry trade that should be blamed for the euro’s rise.
The story that occurred to the Russian rouble is still fresh in our minds: carry trade made it the best Forex performer in 2019. USDRUB’s fall looked paradoxical too. The state of the Russian economy left much to be desired, trade wars slowed down the main partners’ GDP and the Bank of Russia dropped the key rate to stimulate inflation. It’s the latter factor that made non-residents buy out governmental bonds in expectation of a rise in price. A similar story appears to be happening in Europe now.
The European Commission made the first issuance of 10-year and 20-year bonds as part of common debt on 20 October. The sale will finance the EU’s coronavirus-relief programs. The issuance volume amounted to €17 billion, and that’s just a beginning. The fund’s total volume is €750 billion. The mass media once presented those bonds as an alternative to treasuries. That was one of the factors in the EURUSD’s summer rally. I think it’s a mere flow of capital from the USA and developing countries to Europe. Buying EM bonds doesn’t seem to be a good idea amid global GDP’s potential slowdown in Q4. Europe’s periphery is another thing. Greek, Italian and Portuguese bonds look tasty. That lowers their spreads, in comparison with German ones, and points to smaller political risks. Hi, Russia-2019!

Yield spreads in European and German bonds


https://preview.redd.it/3p1xf8ol5gu51.jpg?width=560&format=pjpg&auto=webp&s=8743f58ef1a5d2ca226c89acc76bf2234c6edb5c
Source: Wall Street Journal.
The more the ECB speaks about softening monetary policy, the more actively non-residents buy out European bonds, hoping for a price rise in the future. Obviously, German bonds have no room for growth, but the periphery still offers some earning opportunities. By the way, EURUSD’s 3-month swap spreads became negative in August. That means the Americans can make profit from both a rise in price in EU bonds and hedging.
The risk of a Blue Wave in the USA aggravates the situation. Joe Biden’s victory and the Democrats’ takeover of the Congress will unblock $4-5 trillion in fiscal aid. That will increase the volumes of Treasuries issuance and drop their price. Investors need an alternative urgently, and they find it in Europe.

Trading plan for EURUSD for today

How long will the euro continue growing, considering the growth isn’t fundamentally backed up? The rouble’s last year example says that everything is possible. The EURUSD’s quotes can be rising up to the ECB’s meeting on 29 October. Then a sale-out may follow. I recommend staying outside the market for a while.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-follow-roubles-example-forecast-for-eurusd-for-21102020/?uid=285861726&cid=62423
submitted by Maxvelgus to Finance_analytics [link] [comments]

Second wave hits euro. Analysis as of 19.10.2020

Second wave hits euro. Analysis as of 19.10.2020
However efficient the anti-Covid summer measures may be, the pandemic is returning to Europe, making the currency bloc’s countries impose new restrictions and compromising Q4 GDP growth. How will that affect the EURUSD? Let’s find it out and make a trading plan.

Weekly fundamental forecast for euro

Which is worse: to be always on a losing streak or to have glimpses of hope between losing streaks? EURUSD may help answer that question. The second wave of COVID-19 is spreading across Europe so fast that the eurozone’s double recession is being discussed in the market. Not only will that increase the risk of the EURUSD’s further correction, but it also suggests an eventual turn to downtrend. What’s more, neither China nor Brexit haven’t lived up to the euro fans’ expectations so far.
China’s GDP grew by 4.9% in quarter 3. That’s better than the Q2 value (+3.2%) and worse than the Bloomberg experts’ consensus forecast of 5.3%. Export-oriented China is in trouble as foreign demand is weak. It can’t assume responsibility for the global economy’s fate. Next, the risk of double recession is growing due to another round of restrictions in Germany, France, Spain, Italy amid the severe worsening of the epidemiological situation. That’s the main factor in EURUSD’s collapse.

China’s GDP dynamics


https://preview.redd.it/docyt2qop1u51.png?width=2778&format=png&auto=webp&s=0f5005608e89ff4d439609b0a020a7544cd9a5ef
Source: Bloomberg.

EURUSD rate and EU/US COVID cases


https://preview.redd.it/wmnp6obpp1u51.jpg?width=598&format=pjpg&auto=webp&s=b783d0349491d93c5907b5491b3cd61a4cf2d701
Source: Nordea Markets.
According to Societe Generale, any central bank that can soften monetary policy will do that, especially in the regions with high infection rates and restrictions on movement. Christine Lagarde says the second wave compromises the most the service sector, which accounts for 75% of the eurozone’s GDP. While Europe is facing the risk of QE expansion, the US forward markets presume that Joe Biden’s victory, fiscal stimulus extension, and inflation acceleration will make the Fed raise borrowing costs before 2024.
Thus, the divergence in economic growth and monetary policies starts showing favor to the USD, and that’s not the euro’s only problem. The market still believes that the Brexit issue will be solved at the last moment, just like it happened many times before. However, the clock is ticking, and they still can’t get the things rolling. They say more often that the pound can collapse 10% and draw the euro to the bottom in an unfavorable scenario.
Hopes for a bright future did good for the eurozone’s currency in summer, but they may eventually turn out to be harmful. Germany and the currency bloc plan to cut the budget deficit from 6.25% to 4.25% and from 8.9% to 6% of GDP in 2021. I hope the inopportune phaseout of monetary stimulus won’t stir up a debt crisis in Europe like in 2010-2012.

Weekly trading plan for EURUSD

Thus, EURUSD bulls have plenty of arguments to close long positions. A breakout of support at 1.169 may drop quotes to 1.162 and 1.159. Use a successful bearish storm for opening and building up short positions.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/second-wave-hits-euro-analysis-as-of-19102020/?uid=285861726&cid=62423
submitted by Maxvelgus to Finance_analytics [link] [comments]

Euro is rolling down. Forecast as of 16.10.2020

Euro is rolling down. Forecast as of 16.10.2020
The EURUSDis being corrected down amid several negative factors. They are growing political risks in the USA, the second pandemic wave in Europe, and the high risk of a no-deal Brexit. Let us discuss how bad the situation is and male up a EURUSD trading plan.

Weekly euro fundamental forecast

The EURUSD is down to its two-week low for several reasons. The US stock indexes have been trading down for three consecutive days; additional restrictions are introduced in Paris and London because of COVID-19. Besides, the EU officials announce that agreeing a "fair" new partnership with Britain was "worth every effort" but that the bloc would not compromise at any cost, which sends the pound down. The euro bulls are trying to consolidate the price at the bottom of figure 17, betting on China’s rebound and the ECB’s unwillingness to boost the monetary stimulus before December.
China has attracted $6 billion in the dollar-backed obligations, which repeats the record of 2019. According to the median forecast of the financial analysts polled by the Wall Street Journal, China’s GDP will grow by 5.3% Y-o-Y in the third-quarter report, which is much higher than in the April-June period (+3.2%) and close to the data recorded in 2019 (6.1%). The foreign demand for Chinese securities and the optimism about economic rebound allowed the yuan to compensate for most losses resulted from PBoC’s FX interventions. These facts support the euro.
The euro bulls are also encouraged by the ECB’s unwillingness to expand the monetary stimulus at its October meeting. Despite a sharp downturn of the euro-area economy amid the second pandemic waves, the ECB officials believe there is no need yet to ease the monetary policy. According to the head of the Bank of Holland, Klaas Knot, the regulator needs additional information. The ECB Vice-President Luis de Guindos believes that since less than half of the money in the QE framework has been spent, there is no need to boost asset purchases.

ECB monetary stimulus spending


https://preview.redd.it/esnb9ht5dgt51.jpg?width=583&format=pjpg&auto=webp&s=dd293647240a19596f885ecf8728551baa93c363
Source: Bloomberg
The euro is supported by the fact that China’s economy is growing, and the ECB is unlikely to take active measures. However, the dollar demand increases amid the political uncertainty in the US associated with a lower global risk appetite, which sets the EURUSD bulls back.
The number of Americans filing for unemployment benefits rose by 898 thousand in the week ended October 10th, proving the US labor market needs an additional fiscal stimulus. A poor reading has sent the S&P 500 down and strengthened the greenback. Investors still bet on the Democrats’ victory on November 3. However, they are not willing to buy US stocks now, as they remember how Hillary Clinton, who was leading in the ratings, eventually lost to Donald Trump. If the US stock indices continue falling, the market situation will be similar to that of 2017. At that time, the ECB, discontent with the euro strengthening, used verbal interventions, and the pair failed to consolidate above 1.2.

Dynamics of EURUSD in 2017 and 2020


https://preview.redd.it/ck7knoc6dgt51.png?width=593&format=png&auto=webp&s=e04a6232ebb77be11ea89114fb412fd900e69381
Source: Nordea Markets

Weekly EURUSD trading plan

Remarkably, the EURUSD trend depends on the pound now. The UK is discontent with the EU's willingness to prepare for a no-deal Brexit can drop the GBPUSD deeper and send the euro towards $1.159-$1.162. I suggest one continue holding down the EURUSD shorts entered at level 1.178.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-is-rolling-down-forecast-as-of-16102020/?uid=285861726&cid=62423
submitted by Maxvelgus to Finance_analytics [link] [comments]

Dollar follows the stock market. Forecast as of 12.10.2020

Dollar follows the stock market. Forecast as of 12.10.2020

Weekly US dollar fundamental forecast

The ECB attempts to weaken the euro fail. Philip Lane says the ECB already pursues an inflation strategy similar to the Fed. The European Central Bank is unwilling to tighten monetary policy until the inflation growth is reflected in the economic data. Nonetheless, the EURUSD doesn’t react to the ECB’s chief economist's speech and consolidates above figure 18 bottom. According to the HSBC, fiscal policy is currently the main factor in the financial markets, and central banks must admit that they have lost some power.
Although the United States has invested in its economy more money than most other countries in the world and significantly more than during the previous economic crisis, the fiscal stimulus tends to exhaust quickly. The euro-area governments continue to support small businesses and individuals, while the US policymakers can’t reach an agreement on its extension. The new $1.8 trillion stimulus plan offered by the Republicans is the largest in scale and contrasts with Donald Trump's recent announcement to end negotiations with Democrats. However, House Speaker Nancy Pelosi rejects it, calling the plan insufficient.

Sizes of fiscal stimulus

Source: Bloomberg
Some analysts suggested the new Republican proposal fueled the rally of the US stock indexes. The S&P 500 was 3.8% up in the week through October 9, having featured the best performance since July. I believe the US stock market is rising as the uncertainty around the US presidential election is lowering. Joe Biden’s chance to win is rising, and his victory shouldn't be such a disaster for the US stock indexes as expected earlier.
According to RealClearPolitics, the gap between Biden and Trump is 9.6 percentage points. For comparison, in 2016, Hillary Clinton was 5.8 pp ahead of Donald Trump three weeks before the vote. JP Morgan suggests the corporate tax hike in the case of Joe Biden's victory will temporarily hinder the US stock market. The higher tax rate will take effect on January 1, 2022, and the S&P 500 is likely to face a storm in the fourth quarter of 2021. However, as the experience of 1987 and 2013 shows, when taxes were also increased, the storm would not last long. After the correction, the bulls should resume the uptrend.

S&P 500 reaction to a corporate tax hike


Source: Bloomberg
I believe the US stock market trend is a significant driver for the EURUSD. Ahead of the US presidential election, the pair follows the US stock indexes, mostly ignoring the ECB verbal interventions, the second COVID-19 wave, and the euro-area economic data.

Weekly EURUSD trading plan

The US dollar is a more significant Forex currency than the euro, so the ECB willingness to weaken the euro alone is not enough to discourage the EURUSD bulls. Amid the growth of Joe Biden's approval rating, the EURUSD should continue rallying up to 1.1865-1.188. However, Donald Trump is not giving up yet, so one could sell on the price rise.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-follows-the-stock-market-forecast-as-of-12102020/?uid=285861726&cid=62423
submitted by Maxvelgus to Finance_analytics [link] [comments]

Dollar is getting high on politics. Forecast as of 14.10.2020

Dollar is getting high on politics. Forecast as of 14.10.2020

Fundamental US dollar forecast today

The optimism about the ‘blue wave’ prospects in the US, when democrats take control of the White House and Congress and boost the US fiscal stimulus, is gradually being replaced by skepticism. The Republicans may not lose the majority in the Senate. If so, the disputes about the financial aid package could continue after November 3. Does it make sense to buy stocks? The S&P 500 has dropped. The People’s Bank of China is willing to weaken the yuan. Speculators are existing record euro longs. Under the above conditions, the EURUSD fell below the support 1.178 earlier indicated.
The bets on Joe Biden’s victory are bets against the US dollar. However, this fact alone is not enough. If Democrats fail to control the Congress, the Republicans will oppose the new president just like their opponents did in 2017 when Donald Trump tried to carry out the tax and the medical reforms. Or like it was in 2020 when the White House offers a stimulus package, and the House rejects it. After the US election is over, continuous political uncertainty should support safe-havens, including the US dollar.
Investors wonder what will be after November 3. I don’t think the bet on the growing gap between the US and the euro-area economies should stop working soon. According to San Francisco Fed president Mary C. Daly, the US economy is strong and should withstand a new storm. At the same time, investor confidence in Germany's GDP rebound has fallen to the lowest level over the past five months. The number of COVID-19 cases in Germany has reached 6500, the highest value since April’s peak.

Dynamics of Germany’s economic sentiment


Source: Bloomberg
The expectations are also pressed down by the International Monetary Fund. The IMF has revised the US GDP forecast for 2020 up to -4.3%, from the previous gauge of 8%. The forecast for the euro-area economy has been raised from -10.2% to -8.3%. According to the IMF, the global GDP will contract this year not by 5.2%, projected in June, but by 4.4%. The recession has been mitigated by huge stimulus packages provided by the world’s central banks and governments and the rebound of China’s economy. According to the IMF, China’s economy has already reached the level of 2019 and will exceed it by 1.9 at the end of 2020. In 2021, the Chinese GDP should reach 8.2%.

GDP forecasts


Source: Financial Times
Investors also doubt that the Fed’s monetary expansion is more aggressive than that of the ECB. According to Bloomberg's research, the European Central Bank is buying more assets within the QE than needed to cover the euro-area budget deficit. So, the ECB monetary expansion seems to be more aggressive than the Fed’s.

Budget deficit and QE, % of GDP


Source: Bloomberg

EURUSD trading plan today

So, the bet on the divergence in the economic expansion and monetary policy may not work after the US presidential election. Speculators are exiting the euro longs, and the EURUSD is going down towards 1.1715 and 1.1625. Hold down short trades entered at level 1.178.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-getting-high-on-politics-forecast-as-of-14102020/?uid=285861726&cid=62423
submitted by Maxvelgus to Finance_analytics [link] [comments]

Trading economic news

The majority of this sub is focused on technical analysis. I regularly ridicule such "tea leaf readers" and advocate for trading based on fundamentals and economic news instead, so I figured I should take the time to write up something on how exactly you can trade economic news releases.
This post is long as balls so I won't be upset if you get bored and go back to your drooping dick patterns or whatever.

How economic news is released

First, it helps to know how economic news is compiled and released. Let's take Initial Jobless Claims, the number of initial claims for unemployment benefits around the United States from Sunday through Saturday. Initial in this context means the first claim for benefits made by an individual during a particular stretch of unemployment. The Initial Jobless Claims figure appears in the Department of Labor's Unemployment Insurance Weekly Claims Report, which compiles information from all of the per-state departments that report to the DOL during the week. A typical number is between 100k and 250k and it can vary quite significantly week-to-week.
The Unemployment Insurance Weekly Claims Report contains data that lags 5 days behind. For example, the Report issued on Thursday March 26th 2020 contained data about the week ending on Saturday March 21st 2020.
In the days leading up to the Report, financial companies will survey economists and run complicated mathematical models to forecast the upcoming Initial Jobless Claims figure. The results of surveyed experts is called the "consensus"; specific companies, experts, and websites will also provide their own forecasts. Different companies will release different consensuses. Usually they are pretty close (within 2-3k), but for last week's record-high Initial Jobless Claims the reported consensuses varied by up to 1M! In other words, there was essentially no consensus.
The Unemployment Insurance Weekly Claims Report is released each Thursday morning at exactly 8:30 AM ET. (On Thanksgiving the Report is released on Wednesday instead.) Media representatives gather at the Frances Perkins Building in Washington DC and are admitted to the "lockup" at 8:00 AM ET. In order to be admitted to the lockup you have to be a credentialed member of a media organization that has signed the DOL lockup agreement. The lockup room is small so there is a limited number of spots.
No phones are allowed. Reporters bring their laptops and connect to a local network; there is a master switch on the wall that prevents/enables Internet connectivity on this network. Once the doors are closed the Unemployment Insurance Weekly Claims Report is distributed, with a heading that announces it is "embargoed" (not to be released) prior to 8:30 AM. Reporters type up their analyses of the report, including extracting key figures like Initial Jobless Claims. They load their write-ups into their companies' software, which prepares to send it out as soon as Internet is enabled. At 8:30 AM the DOL representative in the room flips the wall switch and all of the laptops are connected to the Internet, releasing their write-ups to their companies and on to their companies' partners.
Many of those media companies have externally accessible APIs for distributing news. Media aggregators and squawk services (like RanSquawk and TradeTheNews) subscribe to all of these different APIs and then redistribute the key economic figures from the Report to their own subscribers within one second after Internet is enabled in the DOL lockup.
Some squawk services are text-based while others are audio-based. FinancialJuice.com provides a free audio squawk service; internally they have a paid subscription to a professional squawk service and they simply read out the latest headlines to their own listeners, subsidized by ads on the site. I've been using it for 4 months now and have been pretty happy. It usually lags behind the official release times by 1-2 seconds and occasionally they verbally flub the numbers or stutter and have to repeat, but you can't beat the price!
Important - I’m not affiliated with FinancialJuice and I’m not advocating that you use them over any other squawk. If you use them and they misspeak a number and you lose all your money don’t blame me. If anybody has any other free alternatives please share them!

How the news affects forex markets

Institutional forex traders subscribe to these squawk services and use custom software to consume the emerging data programmatically and then automatically initiate trades based on the perceived change to the fundamentals that the figures represent.
It's important to note that every institution will have "priced in" their own forecasted figures well in advance of an actual news release. Forecasts and consensuses all come out at different times in the days leading up to a news release, so by the time the news drops everybody is really only looking for an unexpected result. You can't really know what any given institution expects the value to be, but unless someone has inside information you can pretty much assume that the market has collectively priced in the experts' consensus. When the news comes out, institutions will trade based on the difference between the actual and their forecast.
Sometimes the news reflects a real change to the fundamentals with an economic effect that will change the demand for a currency, like an interest rate decision. However, in the case of the Initial Jobless Claims figure, which is a backwards-looking metric, trading is really just self-fulfilling speculation that market participants will buy dollars when unemployment is low and sell dollars when unemployment is high. Generally speaking, news that reflects a real economic shift has a bigger effect than news that only matters to speculators.
Massive and extremely fast news-based trades happen within tenths of a second on the ECNs on which institutional traders are participants. Over the next few seconds the resulting price changes trickle down to retail traders. Some economic news, like Non Farm Payroll Employment, has an effect that can last minutes to hours as "slow money" follows behind on the trend created by the "fast money". Other news, like Initial Jobless Claims, has a short impact that trails off within a couple minutes and is subsequently dwarfed by the usual pseudorandom movements in the market.
The bigger the difference between actual and consensus, the bigger the effect on any given currency pair. Since economic news releases generally relate to a single currency, the biggest and most easily predicted effects are seen on pairs where one currency is directly effected and the other is not affected at all. Personally I trade USD/JPY because the time difference between the US and Japan ensures that no news will be coming out of Japan at the same time that economic news is being released in the US.
Before deciding to trade any particular news release you should measure the historical correlation between the release (specifically, the difference between actual and consensus) and the resulting short-term change in the currency pair. Historical data for various news releases (along with historical consensus data) is readily available. You can pay to get it exported into Excel or whatever, or you can scroll through it for free on websites like TradingEconomics.com.
Let's look at two examples: Initial Jobless Claims and Non Farm Payroll Employment (NFP). I collected historical consensuses and actuals for these releases from January 2018 through the present, measured the "surprise" difference for each, and then correlated that to short-term changes in USD/JPY at the time of release using 5 second candles.
I omitted any releases that occurred simultaneously as another major release. For example, occasionally the monthly Initial Jobless Claims comes out at the exact same time as the monthly Balance of Trade figure, which is a more significant economic indicator and can be expected to dwarf the effect of the Unemployment Insurance Weekly Claims Report.
USD/JPY correlation with Initial Jobless Claims (2018 - present)
USD/JPY correlation with Non Farm Payrolls (2018 - present)
The horizontal axes on these charts is the duration (in seconds) after the news release over which correlation was calculated. The vertical axis is the Pearson correlation coefficient: +1 means that the change in USD/JPY over that duration was perfectly linearly correlated to the "surprise" in the releases; -1 means that the change in USD/JPY was perfectly linearly correlated but in the opposite direction, and 0 means that there is no correlation at all.
For Initial Jobless Claims you can see that for the first 30 seconds USD/JPY is strongly negatively correlated with the difference between consensus and actual jobless claims. That is, fewer-than-forecast jobless claims (fewer newly unemployed people than expected) strengthens the dollar and greater-than-forecast jobless claims (more newly unemployed people than expected) weakens the dollar. Correlation then trails off and changes to a moderate/weak positive correlation. I interpret this as algorithms "buying the dip" and vice versa, but I don't know for sure. From this chart it appears that you could profit by opening a trade for 15 seconds (duration with strongest correlation) that is long USD/JPY when Initial Jobless Claims is lower than the consensus and short USD/JPY when Initial Jobless Claims is higher than expected.
The chart for Non Farm Payroll looks very different. Correlation is positive (higher-than-expected payrolls strengthen the dollar and lower-than-expected payrolls weaken the dollar) and peaks at around 45 seconds, then slowly decreases as time goes on. This implies that price changes due to NFP are quite significant relative to background noise and "stick" even as normal fluctuations pick back up.
I wanted to show an example of what the USD/JPY S5 chart looks like when an "uncontested" (no other major simultaneously news release) Initial Jobless Claims and NFP drops, but unfortunately my broker's charts only go back a week. (I can pull historical data going back years through the API but to make it into a pretty chart would be a bit of work.) If anybody can get a 5-second chart of USD/JPY at March 19, 2020, UTC 12:30 and/or at February 7, 2020, UTC 13:30 let me know and I'll add it here.

Backtesting

So without too much effort we determined that (1) USD/JPY is strongly negatively correlated with the Initial Jobless Claims figure for the first 15 seconds after the release of the Unemployment Insurance Weekly Claims Report (when no other major news is being released) and also that (2) USD/JPY is strongly positively correlated with the Non Farms Payroll figure for the first 45 seconds after the release of the Employment Situation report.
Before you can assume you can profit off the news you have to backtest and consider three important parameters.
Entry speed: How quickly can you realistically enter the trade? The correlation performed above was measured from the exact moment the news was released, but realistically if you've got your finger on the trigger and your ear to the squawk it will take a few seconds to hit "Buy" or "Sell" and confirm. If 90% of the price move happens in the first second you're SOL. For back-testing purposes I assume a 5 second delay. In practice I use custom software that opens a trade with one click, and I can reliably enter a trade within 2-3 seconds after the news drops, using the FinancialJuice free squawk.
Minimum surprise: Should you trade every release or can you do better by only trading those with a big enough "surprise" factor? Backtesting will tell you whether being more selective is better long-term or not.
Hold time: The optimal time to hold the trade is not necessarily the same as the time of maximum correlation. That's a good starting point but it's not necessarily the best number. Backtesting each possible hold time will let you find the best one.
The spread: When you're only holding a position open for 30 seconds, the spread will kill you. The correlations performed above used the midpoint price, but in reality you have to buy at the ask and sell at the bid. Brokers aren't stupid and the moment volume on the ECN jumps they will widen the spread for their retail customers. The only way to determine if the news-driven price movements reliably overcome the spread is to backtest.
Stops: Personally I don't use stops, neither take-profit nor stop-loss, since I'm automatically closing the trade after a fixed (and very short) amount of time. Additionally, brokers have a minimum stop distance; the profits from scalping the news are so slim that even the nearest stops they allow will generally not get triggered.
I backtested trading these two news releases (since 2018), using a 5 second entry delay, real historical spreads, and no stops, cycling through different "surprise" thresholds and hold times to find the combination that returns the highest net profit. It's important to maximize net profit, not expected value per trade, so you don't over-optimize and reduce the total number of trades taken to one single profitable trade. If you want to get fancy you can set up a custom metric that combines number of trades, expected value, and drawdown into a single score to be maximized.
For the Initial Jobless Claims figure I found that the best combination is to hold trades open for 25 seconds (that is, open at 5 seconds elapsed and hold until 30 seconds elapsed) and only trade when the difference between consensus and actual is 7k or higher. That leads to 30 trades taken since 2018 and an expected return of... drumroll please... -0.0093 yen per unit per trade.
Yep, that's a loss of approx. $8.63 per lot.
Disappointing right? That's the spread and that's why you have to backtest. Even though the release of the Unemployment Insurance Weekly Claims Report has a strong correlation with movement in USD/JPY, it's simply not something that a retail trader can profit from.
Let's turn to the NFP. There I found that the best combination is to hold trades open for 75 seconds (that is, open at 5 seconds elapsed and hold until 80 seconds elapsed) and trade every single NFP (no minimum "surprise" threshold). That leads to 20 trades taken since 2018 and an expected return of... drumroll please... +0.1306 yen per unit per trade.
That's a profit of approx. $121.25 per lot. Not bad for 75 seconds of work! That's a +6% ROI at 50x leverage.

Make it real

If you want to do this for realsies, you need to run these numbers for all of the major economic news releases. Markit Manufacturing PMI, Factory Orders MoM, Trade Balance, PPI MoM, Export and Import Prices, Michigan Consumer Sentiment, Retail Sales MoM, Industrial Production MoM, you get the idea. You keep a list of all of the releases you want to trade, when they are released, and the ideal hold time and "surprise" threshold. A few minutes before the prescribed release time you open up your broker's software, turn on your squawk, maybe jot a few notes about consensuses and model forecasts, and get your finger on the button. At the moment you hear the release you open the trade in the correct direction, hold it (without looking at the chart!) for the required amount of time, then close it and go on with your day.
Some benefits of trading this way: * Most major economic releases come out at either 8:30 AM ET or 10:00 AM ET, and then you're done for the day. * It's easily backtestable. You can look back at the numbers and see exactly what to expect your return to be. * It's fun! Packing your trading into 30 seconds and knowing that institutions are moving billions of dollars around as fast as they can based on the exact same news you just read is thrilling. * You can wow your friends by saying things like "The St. Louis Fed had some interesting remarks on consumer spending in the latest Beige Book." * No crayons involved.
Some downsides: * It's tricky to be fast enough without writing custom software. Some broker software is very slow and requires multiple dialog boxes before a position is opened, which won't cut it. * The profits are very slim, you're not going to impress your instagram followers to join your expensive trade copying service with your 30-second twice-weekly trades. * Any friends you might wow with your boring-ass economic talking points are themselves the most boring people in the world.
I hope you enjoyed this long as fuck post and you give trading economic news a try!
submitted by thicc_dads_club to Forex [link] [comments]

EUR/USD forecast: Euro is scared of heights

EUUSD forecast: Euro is scared of heights

Fundamental Euro forecast for today

Isn’t EUUSD trading too high?

The Forex market is always changing! In winter, the news about progress in the US-China would strengthen the euro. In spring, the US stock market rally would support the EUUSD bulls. At the end of summer, however, the euro isn’t rising amid the US optimistic announcements about making a deal with China. It isn’t rising although the S&P500 has hit a fresh high on the news about the accelerated approval of vaccines and the use of blood plasma to treat critically ill COVID-19 patients. Isn’t the euro trading too high?
Although Donald Trump claims he does not want to talk with China and does not rule out a complete break in relations with this country, US and Chinese officials discussed the status of the trade deal. Chinese Vice-Premier Liu He spoke with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to discuss further action needed to make progress on the trade deal. Such a tone suggests the White House still wants to reach an agreement with China.
Beijing has fallen behind its first-year commitment. Nonetheless, the recovery of China’s economy, growing domestic demand, and the unwillingness to inflame tensions with Washington suggest that there won’t be a new round of trade wars.

China’s commitments on increasing its purchases of US products



Source: Bloomberg
Donald Trump doesn’t want to resume the trade battle ahead of the US presidential election. Joe Biden has already accused him of the failure of his policy with Beijing, so he wouldn’t give his opponent another reason for criticism. China doesn’t want new tariffs. China’s economy, unlike most advanced economies, will expand in 2020. JP Morgan increased the forecast for the Chinese GDP in 2020 from 1.3% to 2.5%. The US GDP, for example, should contract by 8% this year.
The continuous rise of the US stock indexes and progress in US-China trade relations supported Trump’s approval ratings, which could be a reason for the EUUSD correction. What is good for Trump is good for the US dollar.

Dynamics of Trump’s approval rating and USD



Source: Nordea Markets
But still, the primary reason for the euro drawdown is likely to be the second wave of the pandemic in Europe. The ratio of the COVID-19 cases in Europe and the US peaked in early August, but the situation has changed since then.

Dynamics of EUUSD and US-Europe COVID-19 case count



Source: Nordea Markets
If the EUUSD breaks out supports at 1.178 and 1.1755 could suggest entering short-term sell trades. One should not hold the shorts for too long, in my opinion. Many euro’s growth drivers still work out, and the deterioration of the euro-area epidemiological situation will hardly last for a long time.
For more information follow the link to the website of the LiteForex https://www.liteforex.com/blog/analysts-opinions/eurusd-forecast-euro-is-scared-of-heights/?uid=285861726&cid=79634
submitted by Maxvelgus to Finance_analytics [link] [comments]

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