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EURUSD forecast for 14.05.2020

May 14, 2020

May 14, 2020

Dollar hasn’t got to the endDmitri Demidenko

Fed says more stimulus is necessary, Congress and the White House

should authorize more aid

History repeats itself. The [EUR/USD][1] soared to the top of figure 8 at the European Forex session and dropped to its bottom at the US session on May 12. The story repeated on the next day. Jerome Powell’s speech increased the pessimism about the V-shaped recovery of the US economy, so, the S&P 500 dropped, which encouraged the dollar bulls. The euro, which is also pressed down by the euro-area domestic problems, quickly rolled down, and I doubt that it could rally up to the top of figure 8 again.

Coronavirus may turn the split between the rich North and the poor South in the euro area into an economic gap, which sets the euro’s existence in danger. The EU leaders can’t find a compromise on the fiscal stimulus, there is a possibility of a constitutional crisis, and the Brexit issues haven’t been settled down. These factors resulted in an unprecedented rise in the economic uncertainty in the euro area. The euro has become the most vulnerable G10 currency since the peak of market shocks in mid-March.

Dynamics of economic uncertainty in the euro area

![LiteForex: EURUSD forecast for 14.05.2020][2]

Source: Bloomberg.

Performance of G10 currencies

![LiteForex: EURUSD forecast for 14.05.2020][3]

Source: Bloomberg

The [EUR/USD][1] uptrend was supported in early May by the US stocks, however, the drop of the US stock market will strengthen the greenback. The excitement about the $3-trillion fiscal stimulus and the $2.9-trillion monetary stimulus, which should support a quick rebound of the US economy, is gradually fading out. According to the Goldman Sachs survey, most executives of the companies whose securities are included in the S&P 500 calculation base do not expect the V-shaped recovery of the US GDP. The median gauge of 64 economic experts polled by the Wall Street Journal suggests that the US economy will contract by 6.6% in 2020 and won’t reach the pre-crisis level until at least 2022.

US Treasury Secretary Steven Mnuchin says he expects the second quarter to be “pretty bad” but the next quarter will be better, and the US will be back to having a great economy in 2021. Jerome Powell expresses the same ideas. He says the US economy will be recovering slower than it was expected, and Congress should provide additional financial aid to support the previous achievements. The previous economic assistance is not the end. However, the Fed’s chairman shot down the idea of cutting the Fed’s short-term interest rate, which is now near zero, into negative territory, as Donald Trump had asked. Powell says the Fed has good monetary expansion tools, and the negative rates are not what the FOMC is looking at now.

There is hardly any chance of the V-shaped recovery of the US economy, and the S&P 500 has been driven too high by the euphoria. Therefore, the buyers of the US stocks are taking the profits, exiting the longs. The drop in the US stock indexes pushes the [EUR/USD][1] down. If the price breaks out the support at 1.077-1.0775, it should continue falling towards the bottom of the consolidation range 1.065-1.115 that I defined in [mid-April][4].

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Price chart of EURUSD in real time mode

![Dollar hasn’t got to the end][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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  1. my.liteforex.com/trading/chart?symbol=EURUSD&returnUrl=true
  2. cdn.liteforex.com/cache/uploads/blog_post/eurusd/uncertainty-euro-area-14-05-20.jpg?w=30&s=eb10c1b3a3a882556ace2e58199df50f
  3. cdn.liteforex.com/cache/uploads/blog_post/eurusd/g10-14-05-20.jpg?w=30&s=459256bc59703f835c9925cbeb1e2b06
  4. www.liteforex.com/blog/analysts-opinions/saving-private-euro/
  5. my.liteforex.com/?category=analysts-opinions&slug=dollar-hasnt-got-to-the-end&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
  6. my.liteforex.com/deposit/?category=analysts-opinions&slug=dollar-hasnt-got-to-the-end&promo_code=BLOG&utm_source=blog&utm_medium=article&utm_campaign=bonus
  7. cdn.liteforex.com/cache/uploads/blog_post/eurusd/liteforex-blog-eurusd-14-05-20.jpg?q=75&w=1000&s=473eac638af59d8019fbe123600a7fe7