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EURUSD forecast for 04.05.2020

May 4, 2020

May 4, 2020

Dollar messed things up!Dmitri Demidenko

The trade war escalation isn’t the good news for the EUR/USD bulls

The worst that the markets, struggling with the pandemic fallout, may face is a new round of the US-China trade war. Donald Trump claims that there is evidence the COVID-19 originated in a Chinese laboratory, and so he is willing to impose new tariffs against China in revenge for the lives of tens of thousands of Americans. This has triggered a new sell- off in the global stock markets. TheS&P 500 lost all its weekly gains in a few hours, which has strengthened the greenback.

Will the US stock market continue rising May at the same pace as it did in April? I don’t think so. First, the US stocks featured the best rise in April since 1987, and it will be difficult to repeat such a success. Second, although the reopening of the US economy is a good piece of news, the US economic data are horrible, as well as the corporate reports. Besides, there may start a new round of the US-China trade war.

The forecasts for ISM report on the US services PMI, euro-area retail sales, and China’s foreign trade look gloomy. And the US jobs report is also weak. According to the analysts polled by the Wall Street Journal, the US unemployment rate will surge to 16.1% in April, which is much higher than the previous high at 10.8% recorded in 1982. US employment should lose 22 million jobs. The previous worst drop of 1.96 million in September 1945 is far below. After the US employment had been growing for 113 consecutive months, the country faced a disaster. Will the US stocks remain strong?

Dynamics of US payrolls and unemployment

![LiteForex: EURUSD forecast for 04.05.2020][1]

Source: Bloomberg

Week jobs market suggests the US economy will hardly experience a V-shaped recovery in 2020. The [S&P 500][2] rolled down even though Donald Trump announced a payroll tax cut would be necessary. The Americans will benefit from this fiscal stimulus only when they are back to work, but the quarantine leave may last for a long time.

Dynamics of US unemployment and US GDP

![LiteForex: EURUSD forecast for 04.05.2020][3]

Source: Bloomberg

A new round of the US-China trade war may also mess the things up for the buyers of the US stocks. In 2018, Donald Trump attacked China at the right time, as the US economy was strong, supported by the tax reform, and could compensate the import tariffs. But how will it perform now? The US recovery can well be W-shaped, instead of a V-shaped to U-shaped rebound.

The crash of the US stock indexes resulted in a lower global risk appetite that will support the US dollar. The euro will have a hard week through May 8. There will be published the reports on the euro-area retail sales, the EC forecasts for European GDP, inflation, and unemployment. There will also be announced the decision of German’s Federal Constitutional Court on the legacy of the ECB QE. Besides, investors still expect the ECB to boost the QE pace and change the list of assets to purchase. The [EUR/USD][4] should continue falling if the price breaks through the supports at 1.0935 and 1.092.

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Price chart of EURUSD in real time mode

![Dollar messed things up!][7]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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