Forecast for EURUSD for 30 July 2020

July 30, 2020

Forecast for EUR/USD: whose grave is deeper?Dmitri Demidenko

Fundamental forecast for dollar for today

Will euro continue to rally or will EUR/USD consolidate?

The Fed was the main player to fight previous recessions, but now it plays a supporting role. Only the public health sector’s advancement will indicate an economic recovery. No easy money will protect people from COVID-19. At the latest FOMC’s meeting Jerome Powell said that “social distancing measures and a fast reopening of the economy actually go together. They’re not in competition with each other.” The Fed didn’t ask for a new lockdown but admitted that leading indicators started blinking red amid the worsening epidemiological situation. That’s good news for US stocks but bad news for the US dollar.

The Fed made it clear that unprecedented economic support measures would be sustained by extending repurchase agreements and temporary U.S. dollar liquidity swap lines through March 2021. Sellers of securities are having difficulties going against the aggressively disposed Fed, so S&P 500’s growth and the fall of treasuries yield to historical lows look logical. The greenback fell too, but [EUR/USD][1]’s failure to break an important level of 1.18 makes us doubt that big speculators are ready to continue the rally. At least now.

The euro’s fast growth in July attracted much attention and the number of bulls is growing. The main question is whether we should buy “at market” or wait for a pullback. The answer should be looked for in the stats on the US and German GDPs in Q2. The Reuters experts expect that the German economy will decline 9% q/q and 11.3% y-o-y. These are terrible expectations, but compare them with minus 34.1% in the USA and you’ll remember that it’s all relative. It’s been the worst result in the after-war period, which is three times worse than the 1958 anti- record of 10%.

US GDP dynamics

![LiteForex: Forecast for EURUSD for 30 July 2020][2]

Source: Bloomberg.

No, it doesn’t mean the US GDP will lose a third of its value: for that to happen, 1 year will be required because its performance will be compared with April-June 2019. Still, the scale of recession is a question of principle for [EUR/USD][1]. A deeper hole makes it harder to get out. The euro will grow to $1.182 and $1.187 only if upbeat data on Germany are combined with pessimistic stats on the US. Otherwise, we have to be ready for higher volatility and consolidation.

Bulls will start fixing profits due to anxious signals from Europe and Asia. The number of new coronavirus cases and the unemployment rate in Spain are growing while in France, consumer confidence is falling. The Chinese economy slowed down in July according to the Bloomberg leading indicators. The US-China tense relations should be considered too: the trading conflict risks resuming as Beijing isn’t rushing to meet its obligation to increase imports of U.S. goods.

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Price chart of EURUSD in real time mode

![Forecast for EUR/USD: whose grave is deeper?][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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