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EURUSD forecast for 19.06.2020

June 19, 2020

June 19, 2020

Does dollar need a revolution?Dmitri Demidenko

The dollar smile theory is again discussed in Forex

The rules are unable and the ruled ones are unwilling. The [EUR/USD][1] pair seems to be reaching a revolutionary stage which may lead to unexpected results. The buyers of the S&P 500 and the euro are losing the faith in the V-shaped recovery of the US economy, or a soon victory over COVID-19. Besides, such factors as the huge fiscal and monetary stimulus provided by the EU and the ECB have been already priced in the major currency pair. The bulls need good news or fresh drivers to be encouraged to buy, but such drivers are not always provided. Bears are not willing to ahead without being confident in the second wave of the pandemic or the escalation of trade wars. Is there coming a revolution?

Donald Trump is again talking about cutting off relations with China. Steven Mnuchin says the U.S. doesn’t want to continue negotiations on digital taxation at the OECD. France calls this a provocation. Despite the investigation launched by the US trade representative Robert Lighthizer on whether Washington can unilaterally impose import tariffs as retaliation to the taxation of the US large companies abroad, France states it will continue taxation of digital giants. Facebook, Apple, and other giants receive a substantial revenue share from European users, which can’t but raise concerns in the EU. There is now a real chance that the dispute will end with a trade war.

The number of new COVID-19 cases is growing in some US states and in the world, the euphoria in the US stock market is gradually giving way to fear. The S&P 500 drop below 3000 will be a real disaster for the [EUR/USD][1] bulls. Investors discuss the idea that [the dollar smile theory][2] will work out once again. It suggests the greenback strengthen following the crash of the stock indexes signaling a recession, and it weakens amid the Fed’s huge monetary stimulus and the improvement of the risk appetite. However, the dollar should start rising again afterward amid the expectations that the US economy will be recovering faster than the global. In fact, strong US employment data and retail sales increase the chance that the US GDP will quickly rebound, and the USD index is moving according to the smile theory. Its 10% rise was followed by a 6% crash. Is there going to be the third stage?

V-shaped recovery of the US economic surprise index

![LiteForex: EURUSD forecast for 19.06.2020][3]

Source: Citigroup

Investors are closely watching the events going on in the USA, and I can understand this. The growing dominance of the dollar in international finance means that U.S. problems pose a threat to the entire world. According to BIS, the share of the greenback as a currency for international financing has been the biggest since 2000. Its share in global FX reserves is 61%, in exchange operations – 85%, __ in the international settlements – about 50%.

What can the euro present? The official approval of the French-German fiscal stimulus project at the EU summit in June? I do not think this will provoke a strong reaction of traders. Another matter if there are problems with the plan’s approval. In this case, the [EUR/USD][1] could drop to 1.115 and 1.1125.

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Price chart of EURUSD in real time mode

![Does dollar need a revolution?][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. www.liteforex.com/blog/for-professionals/dollar-smile-theory/
  3. cdn.liteforex.com/cache/uploads/blog_post/eurusd/surprise-usa-19-06-20.jpg?w=30&s=38c358186c51e5e749a434dd358f1024
  4. my.liteforex.com/?category=analysts-opinions&slug=does-dollar-need-a-revolution&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
  5. my.liteforex.com/deposit/?category=analysts-opinions&slug=does-dollar-need-a-revolution&promo_code=BLOG&utm_source=blog&utm_medium=article&utm_campaign=bonus
  6. cdn.liteforex.com/cache/uploads/blog_post/eurusd/liteforex-blog-eurusd-19-06-20.jpg?q=75&w=1000&s=7ae8631252294f3f3b7e1d71e3313c90