Logo

Posts

EURUSD forecast for 02.07.2020

July 2, 2020

July 2, 2020

Euro protects its fansDmitri Demidenko

Fundamental Euro forecast for today

The EUR/USD rally signals the success of the euro-area medical

services and management

The pandemic has changed not only the world but view of the world as well. Earlier, the export-led euro-area economy needed the weak euro. Now, the surge of the trade-weighted euro doesn’t bother the ECB or the EU governments. When the common goal is to increase the domestic demand, not foreign demand, the strong local currency is what they need. The euro growth means that the management of the crisis resulted from COVID-19 in Europe is more effective than the US management, and so, the euro area could exit the recession sooner than the U.S.

Dynamics of trade-weighted euro

![LiteForex: EURUSD forecast for 02.07.2020][1]

Source: Bloomberg

The recession in Europe is deeper than in the USA, however, the recovery trend is faster. According to Bloomberg, the economic activity in Germany and France in mid-June was 80-90% of the pre-crisis level compared with 65% in the USA. The speed of the GDP recovery trend is of key importance for the capital flows, the demand for the securities issued in the regions, and for the [EUR/USD][2] price. The euro-area stock indexes look undervalued compared to the US stocks, and the capital inflow to Europe from the USA will support the euro.

Dynamics of EuroStoxx 600 and S&P 500

![LiteForex: EURUSD forecast for 02.07.2020][3]

Source: Bloomberg.

One could doubt the euro strength amid the ECB €1.35 trillion pandemic emergency purchase program and ultra-low interest rates. However, the Fed’s monetary stimulus is bigger. The decision to hold the federal funds rate around zero through the end of 2022 and the discussion of the potential yield control policy at the FOMC June meeting deprive the dollar of its important benefits. Yes, the Fed says it is too early to suggest targeting bond yields, however, if the US growth continues to recover and the bond market rates continue to rise, its policy may change.

Therefore, the current euro’s strength mostly results from the hope that the ECB and the euro-area governments will protect the economy better than their colleagues in other world regions. Advances in medicine and the improvement of the epidemiological situation in Europe increases the euro risk reversals. The premium for the euro buy options against safe- haven assets such as the US dollar or Japanese yen is growing faster than the price of sell options.

Dynamics of the ratio of U.S. versus Germany confirmed COVID-19

cases and EUR/JPY risk reversals

![LiteForex: EURUSD forecast for 02.07.2020][4]

Source: Bloomberg

Of course, the [EUR/USD][2] is greatly supported by the US stock indexes. The best three-month rise of the US stock market over the past two decades was one of the reasons for the euro rally in the May-June period. Besides, Instinet notes that the last seven times the [S&P 500][5] __ rose 15% in a quarter, it rose an average of 9.5% in the next quarter. Strong reading of the US jobs market should support the stock market rise and encourage the euro fans to open longs at the breakout of the resistance at $1.129 with the targets at $1.1335 and $1.139.

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” :)

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

Useful links:

  • I recommend trying to trade with a reliable broker [here][6]. The system allows you to trade by yourself or copy successful traders from all across the globe.
  • Use my promo-code BLOG for getting deposit bonus 50% on LiteForex platform. Just enter this code in the appropriate field while [depositing][7] your trading account.
  • Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders

Price chart of EURUSD in real time mode

![Euro protects its fans][8]

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.

Rate this article:

{{value}}

( {{count}} {{title}} )

  1. cdn.liteforex.com/cache/uploads/blog_post/eurusd/twi-euro-02-07-20.jpg?w=30&s=fba973413785ea661e7939f0711d6087
  2. my.liteforex.com/trading/chart?symbol=EURUSD&returnUrl=true
  3. cdn.liteforex.com/cache/uploads/blog_post/eurusd/stocks-usa-euro-02-07-20.jpg?w=30&s=d1158e17310239ed5e2146e109670696
  4. cdn.liteforex.com/cache/uploads/blog_post/eurusd/euro-risk-reversal-02-07-20.jpg?w=30&s=965dea81cef4c46b0464b18e31cf004e
  5. my.liteforex.com/trading/chart?symbol=SPX&returnUrl=true&
  6. my.liteforex.com/?category=analysts-opinions&slug=euro-protects-its-fans&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
  7. my.liteforex.com/deposit/?category=analysts-opinions&slug=euro-protects-its-fans&promo_code=BLOG&utm_source=blog&utm_medium=article&utm_campaign=bonus
  8. cdn.liteforex.com/cache/uploads/blog_post/eurusd/liteforex-blog-eurusd-02-07-20.jpg?q=75&w=1000&s=409b5aad97be0f840a169e51863d1b06