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EURUSD forecast for 08.06.2020

June 8, 2020

June 8, 2020

The dollar gave a pleasant surpriseDmitri Demidenko

The US employment rebounds quickly, which signals the recession has

been the shortest in the US history

A downturn ends when the economy starts expanding. The US employment was up in May at the highest monthly pace since World War Two (+2.5 million), the US current US recession is going to be the deepest but the shortest since the 1930s. Despite the gloomy forecasts suggesting the rise in the unemployment rate to 20%, the indicator has been down from 14.7% to 13.3%, which sent the US stock indexes 3% up and encouraged the [EUR/USD][1] bulls to take the profits. When everyone is buying, it is a good chance to sell. The US dollar has strengthened due to this principle, the optimism about a quicker rebound of the US GDP than the global indicator, and the growth in the Treasury yields.

Dynamics of employment and unemployment in the USA

![LiteForex: EURUSD forecast for 08.06.2020][2]

Source: Bloomberg

The euro’s three-week rally must have resulted from the signs of the unity in the euro area amid a considerable boost of the fiscal and monetary stimulus. According to the Bundesbank, which suggested the growth of Germany’s GDP by 3.2% and 3.8% in 2021-2022 following a drop by 7.1% in 2020, tax cuts in Germany and other support measures will add a percentage point to the GDP growth pace next year. Besides, I think it makes sense to exit the euro longs, as almost a 6% rally of the [EUR/USD][1] since late May suggests that most of the positive has been priced in the pair’s quotes. It is now relevant to sell, as many investors, encouraged by the pleasant surprise made by the US jobs report, are buying.

Will the euro sell-off continue? The clue should be given by Donald Trump and the Fed. The US president again threatens the EU to increase the import tariffs on European cars. The White House, as in the case of China in 2018-2019, starts with small steps. Trump claims that the Canadian lobsters are imported duty-free by the EU, while there is an 8% duty in the block for American live lobsters. If the EU doesn’t drop its tariff, the US will impose a new tariff on the EU cars. The same is also acute for China, which imposed a levy on the US live lobsters. The global economy, as well as China, is already weak amid the pandemic fallout, and a new round of trade wars will further weaken it. China’s economy is gradually recovering. In May, China’s foreign trade surplus was up to the record level of $62.9. This should support GDP growth.

Dynamics of China’s foreign trade

![LiteForex: EURUSD forecast for 08.06.2020][3]

Source: Bloomberg

Will the Fed weigh on the US dollar? The huge volumes of the Treasury issuance (it is about $3 trillion in the second quarter, which is equal to 15% of GDP), an increase in the US employment and inflation rate encourages investors to buy risky assets and sell the government bonds. The growth of the Treasury yields will hinder the economic recovery and boost the debt servicing costs. Under such conditions, the Fed could follow the experience of BoJ and the RBA, which means the bond yield targeting. This will deprive the greenback of its important advantage. If so, it will be relevant to enter the [EUR/USD][1] longs when the price rebounds from the supports at 1.124 and 1.12.

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Price chart of EURUSD in real time mode

![The dollar gave a pleasant surprise][6]

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/labor-markets-usa-08-06-20.jpg?w=30&s=626ffde5cf77ba411296f2c86f2984de
  3. cdn.liteforex.com/cache/uploads/blog_post/eurusd/china-trade-balance-08-06-20.jpg?w=30&s=75e683975a555c1535048909a65feaa2
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  6. cdn.liteforex.com/cache/uploads/blog_post/eurusd/liteforex-blog-eurusd-08-06-20.jpg?q=75&w=1000&s=820297a1b9b9df258c47c8b4eecd9c90