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EURUSD forecast for 20.07.2020

July 20, 2020

July 20, 2020

EUR/USD forecast: Will Greed ruin the Euro?Dmitri Demidenko

EUR/USD forecast: Will Greed ruin the Euro?

The EUR/USD may be corrected deeply because of €50 billion

Europe can wait. Until Monday. The EU decision on €1.8-trillion stimulus package is delayed. Because of €50 billion. That is the amount of the fiscal stimulus that can be the reason for the euro fall and the turmoil in the euro-area debt market. According to Citigroup, the progress in the negotiations between the rich North and the poor South could reduce the spread between Italian and German bonds by up to 10 basis points. Any reduction in grants could widen it by 30 basis points. In the thin summer market, where the trade volumes have down much, far stronger moves are possible.

Dynamics of bond trading volumes

![LiteForex: EURUSD forecast for 20.07.2020][1]

Source: Bloomberg

The French-German emergency package provided for the attraction of resources to fight the pandemic economic fallout as the bond issue by the European Commission for €750 billion. €500 billion should have been distributed for free, as grants.€250 billion should be repaid. In addition to bonds, the stimulus package also includes an extra budget of €1.1 trillion. The amount of grants has become the stumbling block between the rich North and the poor South. The European Council president Charles Michel offered to reduce the portion of the grant in the package to €400 billion, which quite satisfied two of four representatives of the Frugal Four, Denmark, and Sweden. However, the two remaining countries, the Netherlands and Austria are willing to pay no more than €350 billion.

The North is satisfied, bur the South is resenting. Italian Prime Minister Giuseppe Conte said that Europe was “under the blackmail of the frugals”, and the important issue is being solved by the center as usual. Paris, Berlin, Amsterdam, and Vienna will try to find a compromise. The initial amount of the dispute was €150 billion, and it has been reduced to €50 billion. This fact suggests hope that the EU governments will reach an agreement, and the [ EUR/USD][2] will resume rising. After all, if they fail to agree, there will be appointed the date for the next extraordinary EU summit for further discussions. The turmoil in the euro-area bond market and mass exiting the euro long trades will result in the pair’s correction down.

Investors will immediately remember negative factors for the euro, which they have been ignoring amid the EUR/USD rally in the May-July period. One can insist on an investment idea if there are minor flaws. But, if the drawbacks are getting stronger, the idea will ultimately fail. This refers to both the US-EU trade relations and the euro-area labor market.

France and other EU countries still insist on the introduction of the digital tax, which will hit the US companies first of all. The Austrian court ruled that the European customer data could not be stored in the US, which would cause serious problems for Facebook and other US corporations. The EU may face a trade war with the US. Besides, the exhaustion of the euro-area fiscal stimulus could push up the unemployment rate in Europe, and so, slow down the euro-area GDP recovery trend.

After all, investors now focus on the EU decision on the stimulus package. If the EU governments reach a compromise, the[ EUR/USD][2] pair can break out level 1.15 and go up. If they fail to agree, the pair could roll down to 1.141and 1.1365-1.137.

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Price chart of EURUSD in real time mode

![EUR/USD forecast: Will Greed ruin the Euro?][5]

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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  2. my.liteforex.com/trading/chart?symbol=EURUSD&returnUrl=true
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