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EURUSD forecast for 08.05.2020

May 8, 2020

May 8, 2020

Dollar backsteppedDmitri Demidenko

The US-China trade war may not start again

The US stocks again support the euro. The [EUR/USD][1] bears failed to break through the support at 1.077-1.0775 or send the pair down, as the euro was supported by the S&P 500, rising amid good news. The FOMC officials believe that the recession can be averted, analysts discuss a potential boost of the fiscal stimulus, the trade representatives of the U.S. and China sound optimistic. Therefore, investors are lured back to the U.S. stocks. However, the U.S. jobs report for April may discourage them.

On of the U.S. dollar’s growth drivers in early May were the talks about the US-China trade war escalation that increased the safe-haven demand. Donald Trump threatened China with new tariffs. First, he suggested that the COVID-19 had appeared in a Chinese laboratory, next, he claimed that China failed to fulfill the commitments, agreed in January, to increase the purchases if the US products by $200 billion, including $77 billion in 2020. Over the first four months, the US exports to China contracted by 5.9%, which raises doubts that the parties fulfill their obligations. However, Liu He, Robert Lighthizer, and Steven Mnuchin sound optimistic. This optimism supports [EUR/USD][1] bulls.

Yes, Donald Trump needs someone to blame ahead of the US presidential elections. However, the more pressure he puts on Beijing, the more his protectionism will be criticized. The US protectionism doesn’t seem to be efficient. The US failed to make China do everything Trump had wanted. Even though Chinese exports to the U.S. declined by $60 billion due to the import tariffs, but the exports to other countries increased by about $70 billion.

Dynamics of China’s exports

![LiteForex: EURUSD forecast for 08.05.2020][2]

Source: Wall Street Journal

Trump is getting more cooperative. The US stock indexes are also supported by the information that Democrats in the House of Representatives prepare a draft bill that is expected to include more than $750 billion in aid, and the FOMC officials announce that there won’t be repeated the story of the Great Depression of the 1930s. Federal Reserve Bank of Minneapolis President Neel Kashkari says the Fed is going to continue to be aggressive to fight that outcome. Atlanta Fed’s president Raphael Bostic says it is better to do more than necessary than to do too little to support the U.S. economic recovery.

The optimism of the FOMC officials was expected, however, the US jobs report will probably show that the current economic state of the USA is even worse than in the 1930s. According to the analysts surveyed by Bloomberg, the US unemployment rate should be up to its record high of 16% in April, the employment will contract by 22 million jobs, which is 27 times more than the worst employment drop in the crisis of 2007-2009 and 11 times more than the previous drop in September 1945 when the US economy was recovering after World War II. Will the S&P 500 remain stable? If the uptrend continues, the [EUR/USD][1] may climb higher than 1.09. Otherwise, the bears will again try to break out the support 1.077-1.0775.

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Price chart of EURUSD in real time mode

![Dollar backstepped][5]

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  1. my.liteforex.com/trading/chart?symbol=EURUSD&returnUrl=true
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  5. cdn.liteforex.com/cache/uploads/blog_post/eurusd/liteforex-blog-eurusd-08-05-20.jpg?q=75&w=1000&s=7adf7e3d33c1b9ea5797550a8108ef5b