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EURUSD forecast for 29.06.2020

June 29, 2020

June 29, 2020

Has the dollar crossed the red lines?Dmitri Demidenko

China retaliates to the U.S. attacks

You can lead the horse to water, but you can’t make him drink. World’s central banks and governments have spent huge amounts of money to protect people from the recession caused by the pandemic. A substantial part of the money was acquired by consumers, and they determine how quickly the economy will rebound. The euro remained stable amid the drop of the U.S. stock indexes in the week through June 26, which means that the euro-area GDP growth will recover sooner than the U.S. growth. Therefore, one economy will face a V-shaped rebound, another – U-shaped recovery, and some economies won’t recover at all.

According to the ECB data, household savings rose by €214 billion in the February-May period and reached an all-time high of €7.3 trillion. In April, the U.S. personal savings rate jumped to 32.2%. Before Covid-19 in records that date to 1959, that number had never exceeded 17.3% and had cleared 10% only once since 1995. Although the saving rate was down to 23.2% in May, the deterioration of the epidemiological situation in the USA suggests that the Americans won’t spend as much money as the European consumers.

Dynamics of the U.S. personal savings rate

![LiteForex: EURUSD forecast for 29.06.2020][1]

Source: Bloomberg

The high savings rate is a problem for the Fed, which should hold the interest rates low and continue supplying the liquidity to the financial markets trying to encourage people to spend. The minutes of the last FOMC meeting should be dovish. This fact, in addition to the expected positive reading of the U.S. jobs data, Germany’s retail sales, and China’s PMI, encourages the [EUR/USD][2] bulls. On the other hand, the drop of the US stock indices presses the major currency pair down.

Dynamics of the U.S. job market indicators

![LiteForex: EURUSD forecast for 29.06.2020][3]

Source: Bloomberg

The major benefits of the S&P 500 stopped working in late June. The number of workers applying for and receiving unemployment benefits has stabilized, which makes the V-shaped recovery less likely in the US, and the epidemiological situation in the USA is deteriorating. Furthermore, Beijing starts to respond to the U.S. attacks. China’s officials say the U.S. attacks on pain points (Hong Kong, Taiwan) could jeopardize the purchase of agricultural products and other US exports. The USA should not cross the red lines. The “phase one” trade deal suggests there should be a favorable environment for China to meet its obligations.

The number of COVID-19 cases in the world exceeded 10 million, the number of deaths is more than 500,000. The U.S. Department of Health and Human Services (HHS) says the coronavirus tests reveal only one case out of ten, accusing Donald Trump of denying the problem. Another lockdown will result in a double-dip recession in the USA and the strengthening of the greenback. So, it is natural that both the S&P 500 and the [EUR/USD][2] are very responsive to the coronavirus news. If the epidemiological situation improves, the S&P 500 will remain above the psychologically important level of 3000, and the euro will break out the resistances at $1.129 and $1.1335.

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Price chart of EURUSD in real time mode

![Has the dollar crossed the red lines?][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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