EURUSD forecast for 04.08.2020

August 4, 2020

EUR/USD forecast: Dollar goes into politicsDmitri Demidenko

Fundamental U.S. dollar forecast for today

US jobs report for July can be one of the most significant political

events in 2020

If investors bet on currencies depending on the epidemiological situation, then the drop in the number of new coronavirus cases in the U.S. to 47,000 per day, which is the lowest figure over the past four weeks, should strengthen the US dollar. Besides, the US manufacturing PMI rose to the highest level since March 2019. Furthermore, there is positive news about the progress in the negotiations between Democrats and Republicans in Congress on the extension of the US fiscal stimulus. However, investors are willing to pick up the [EUR/USD][1] uptrend, so, even the slightest drop attracts new buyers.

Everything is relative. Earlier, the number of new COVID-19 cases was growing by 40%-50% in the U.S., now, it is declining. Nonetheless, the epidemiological situation in Europe is better than in the USA, which can’t but influence the PMI.

Dynamics of the US manufacturing PMI

![LiteForex: EURUSD forecast for 04.08.2020][2]

Source: Wall Street Journal

However, the example of China proves that the initial growth momentum could slow down further. If the US takes control of the virus, the associated optimism can trigger the rebound of the purchasing managers index. Yes, the long-term [EUR/USD][1] bullish factors, including the inflow of portfolio investments into the euro-area markets and an increase in the proportion of the euro in the global FX reserves will continue working. However, investors wonder now if it is too early for the pair to be trading above 1.2.

The question can well be answered by… politics. The USD trend is closely correlated with Donald Trump’s approval ratings. That is why there were massive sell-offs of the greenback after Trump had suggested a delay to the 2020 US presidential election. Furthermore, the US jobs report for July could become one of the most significant political events in 2020.

Dynamics of U.S. dollar index and Donald Trump’s approval ratings

![LiteForex: EURUSD forecast for 04.08.2020][3]

Source: Nordea Markets

If the employment continues growing at the same pace as it did in the May-June period, and the unemployment rate shrinks, the need for the extra fiscal stimulus, called for by Democrats, will be less, and the White House will stick to the idea of the US quick economic recovery. Otherwise, if the jobs report is weak, Joe Biden’s approval ratings will grow, pressing down the USD. Therefore, the publication of the US employment data is a very important event for the dollar pairs in Forex. Ahead of such important news releases, the markets usually consolidate. Investors do not want to go ahead until the situation is clear. The only thing that could encourage Forex traders to be active now is the fear of missing out the [EUR/USD][1] uptrend.

Therefore, I suggest several scenarios. The [EUR/USD][1] consolidation in the trading range of 1.166-1.186 is the most likely one. If the pair breaks out the top of the trading range and continues its rally, it will be an inadequate reaction to the US jobs employment data. If the US weak jobs data are already priced in the euro-dollar, large investors are likely to start exiting longs while all the rest are buying.

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

![EUR/USD forecast: Dollar goes into politics][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}} )