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EURUSD forecast for 17.06.2020

June 17, 2020

June 17, 2020

Dollar: is the glass half-full or half-empty?Dmitri Demidenko

The U.S. dollar is responsive to the market sentiment, optimistic or

pessimistic

If the glass is half full for Donald Trump, for Jerome Powell, it is half empty. The Fed Chairman, during his speech to Congress, said a full US economic recovery will not occur until the American people are sure that the coronavirus epidemic has been brought under control. Despite an improvement of some economic indicators, production and employment are still below the pre-crisis levels. Besides, there is still great uncertainty about the strength and the terms of the US GDP rebound. Once the central bank’s president suggested uncertainty, the US dollar has strengthened. As I have stressed many times, all kinds of uncertainty support safe-haven demand.

The Fed has managed to stabilize the US stock market using the huge monetary stimulus. At present, however, the Federal Reserve seems to be concerned about a too fast rally of the S&P 500. The epic rally of the US stocks obviously includes a speculative element, the bubble is being inflated, and, if there is a second wave of COVID-19, it will immediately burst. The White House accuses Jerome Powell of being too pessimistic, but the Fed’s president is a realist who realizes that it is better to show restraint than build castles in the sky.

Financial markets are quite responsive to the speeches of the Fed’s Chairman. The growth of retail sales in May by 17.7% M-o-M, which is the best performance since the record began in 1992, has provided only temporary support to the S&P 500. Investors still realize that the indicator is below the pre-crisis level ($485 billion compared to $527 billion in February), and has contracted by 6.1% on an annual basis. That is what Jerome Powell was talking about, there are already some positive signs, but the general outlook is still grim.

Dynamics of US retail sales

![LiteForex: EURUSD forecast for 17.06.2020][1]

Source: Bloomberg

Therefore, the dollar is supported by uncertainty, and the euro buyers are nervous ahead of the EU summit on June 18-19, where the fiscal stimulus issues will be discussed. The French-German plan is adopted de facto, but it is still to be legally approved. According to the German government, the ECB actions should be explained to the German Constitutional court by the Bundesbank. The Bundesbank, by the way, has already presented all the benefits of the European QE on its website.

The inflation slowdown increases the risk of the QE expansion, which won’t be the bullish factor for the [EUR/USD][2] as the euro-area economy is recovering. According to Citigroup, the extra €600 billion added by Christine Lagarde and her colleagues in early June do not meet the borrowing needs of the euro-area countries. The ECB will have to boost the QE by at least another €150 billion. Otherwise, Italy’s bond yield will start rising again. The euro still has its flaws, but all the problems can be solved.

Fiscal and monetary stimulus in the Eurozone

![LiteForex: EURUSD forecast for 17.06.2020][3]

Source: Bloomberg

The weak response of the S&P 500 to the US strong retail sales data is the bad news for the [EUR/USD][2] bulls. Another negative factor is the uncertainty around COVID-19 and the US economic rebound. However, if you believe that the glass is half-full, you could bet on the breakout of the top of the consolidation range 1.124-1.134.

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Price chart of EURUSD in real time mode

![Dollar: is the glass half-full or half-empty?][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. cdn.liteforex.com/cache/uploads/blog_post/eurusd/retail-sales-17-06-20.jpg?w=30&s=511b2e03c84acc3f3e034d5c9a1b684b
  2. my.liteforex.com/trading/chart?symbol=EURUSD&returnUrl=true
  3. cdn.liteforex.com/cache/uploads/blog_post/eurusd/ecb-buying-17-06-20.jpg?w=30&s=1756934ca52f294e6e4df899de1cfe66
  4. my.liteforex.com/?category=analysts-opinions&slug=dollar-is-the-glass-half-full-or-half-empty&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
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  6. cdn.liteforex.com/cache/uploads/blog_post/eurusd/liteforex-blog-eurusd-17-06-20.jpg?q=75&w=1000&s=bcf7fe27d114a2c96882b01252f6cc7e