EURUSD forecast for 08.07.2020

July 8, 2020

Dollar uses old tiesDmitri Demidenko

Fundamental US dollar forecast for today

The correlation between USD and the S&P 500 has recovered and is at

the highest level since 2016

When the market is in a game of tug-of-war, there could hardly be such strong moves as there were in the second quarter. Good news from Europe alternates with the gloomy forecast for the US economic recovery, which weighs on the US stock indexes and supports the greenback as a safe haven. As a result, the [EUR/USD][1] pair is consolidating in the range of 1.11-1.14, and the Fed should be extremely careful not to scare off investors.

The speech of Federal Reserve Vice Chairman Richard Clarida, instead of calming financial markets, resulted in a turmoil. He says the US central bank has not run out of monetary tools. The Fed could again take the measures that proved to be efficient in the past and expand the balance sheet. Such a tone suggests that the US economic state is getting worse, and the Fed expects a W-shaped recovery of the US GDP. As a result, the [S&P 500][2] has closed in the red zone, especially since the epidemiological situation in the USA is still difficult. Over the fifth day of seven, there are more than 50,000 new coronavirus cases in the U.S., and the death rate is again up to the highest levels since early June. People are getting more concerned about the COVID-19 pandemic, and it is a negative factor for the US stock indexes.

Dynamics of S&P 500 and Google searches for COVID-19

![LiteForex: EURUSD forecast for 08.07.2020][3]

Source: Nordea Markets

In May, the number of layoffs in the US (1.8 million) was down to the pre-crisis levels. However, the situation, when even strong reports on the US retail sales, PMI, and jobs market is seen as a reason to worry about the growth of new coronavirus cases, presages nothing positive. The White House still tries to be optimistic, actively promoting its $660 billion small-business relief program that saved 51 million jobs. What else could the US administration do when Donald Trump’s approval rating is down? According to the Financial Times poll, the proportion of Americans who expect that the coronavirus pandemic in the US will worsen next month has increased from 35% to 49%. Only 39% of respondents believe the US economy will rebound this year, compared to 42% in June.

Forecasts for the epidemiological situation in the USA

![LiteForex: EURUSD forecast for 08.07.2020][4]

Source: Financial Times.

The opinion of the population is similar to the OECD forecasts, seeing the US unemployment rate at 11.3% and 8.5% in 2020-2021. If the economy is locked down again, unemployment will be up to 12.9% and 11.5%. I should note that not only the US economic outlook is gloomy, but the EU’s as well. The European Commission has lowered its forecasts for the euro-area GDP from -7.4% to -8.3% this year and from + 6.1% to + 5.8% next year. Nonetheless, the COVID-19 in Europe is better than in the USA, and the Eurozone periphery government bond yields returned to the pre-crisis levels.

Therefore, my forecasts have been accurate. The euro has quickly recovered its correlation with the [S&P 500][5], and the [EUR/USD][1] is consolidating [in the range of 1.11-1.14][6]. The euro might continue its rally, but it should be supported by the US stock indexes. The next support level is close to 1.124, and the resistance is in the zone of 1.129-1.13.

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Price chart of EURUSD in real time mode

![Dollar uses old ties][9]

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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