EURUSD forecast for 22.07.2020

July 22, 2020

Euro brings happinessDmitri Demidenko

Fundamental Euro forecast for today

The EUR/USD surge to 18-month highs made the world’s authorities

happy

How little it takes to make people happy! First, lose something important, and then get it back to feel good. The [EUR/USD][1] has been back to the levels of early 2019, and so the high and mighty are satisfied. For example, Donald Trump is happy, as he has many times criticized the strong dollar. The EU governments are happy as the strong euro signals the euro-area unity. The IMF is happy as it says the too high dollar’s value hampers the global economic recovery. The euro bears may argue that the ECB won’t let the rally continue as it is not beneficial for the export-let euro area. I, however, do not agree. When the authorities try to support the domestic demand cheap import becomes a more important factor than the interests of foreign buyers.

The leading Wall Street banks share the same opinion. Just yesterday, I noted that the approval of the French-German stimulus plan will support European stock in the competition with the US peers. It will increase the capital inflow to the euro-area markets, and so, the proportion of the euro in the FX reserves of the central banks will grow, just like its value. For example, Credit Suisse stresses that the percentage of the dollar in the global currency reserves can drop to the levels recorded in the early 1990s. The bank sees the [EUR/USD][1] at 1.18 and higher.

Dynamics of the US dollar proportion in the global FX reserves

![LiteForex: EURUSD forecast for 22.07.2020][2]

Source: Bloomberg

According to Mizuho, the current fair value of the euro is $1.22 and its rate may rise to $1.3 within 12 months due to large-scale purchases of high-yield bonds of the euro-area peripheral countries. The risks of the defaults have lowered after the EU governments agreed on the €1.8-trillion fiscal stimulus. AG Bisset Associates, which has been bearish on the US dollar for a long time, believes that the [EUR/USD][1] will be 30% in the next 16 months.

I believe the market continues working out the idea of the divergence in economic growth. The EU approval of the fiscal stimulus should speed up the euro-area GDP recovery trend. The US growth, however, is set back by disputes between the members of Congress and the White House. Democrats are willing to do even more than they were before (the House of Representatives approved a $3.5 trillion stimulus package). The Republicans, however, reject this proposal suggesting a package of $1 trillion, including payroll tax cuts to encourage people to return to jobs.

According to Bloomberg’s leading indicators, the gap in the recovery paces of the euro area and the US widened over the past week. The lack of agreement on the US new fiscal stimulus plan will widen it even more.

Dynamics of the global GDP recovery trends

![LiteForex: EURUSD forecast for 22.07.2020][3]

Source: Bloomberg

So, the bet on the divergence in the epidemiological situation and economic growth in the euro area and the US is working and should continue working. The [EUR/USD][1] upside target is at 1.17 by the year’s end. I recommend buying the euro on the corrections down.

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][4]. 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][5] 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 brings happiness][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.

Rate this article:

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