EURUSD forecast for 07.08.2020

August 7, 2020

EUR/USD forecast: Dollar dreams about the pastDmitri Demidenko

Fundamental U.S. dollar forecast for today

EUR/USD bears hope to win back amid the escalation of trade wars

Forex investment ideas are often based on old patterns. History repeats itself, and the market can move in the same way as it did. The U.S. re- introduced import tariffs on Canadian aluminum, which resembles the events of 2018 when the US did the same and unleashed the trade war with China. Under the guise of national security interests, Donald Trump was not legible when choosing the means. Any means are good to win. However, the U.S. economy is much weaker than it was 2.5 years ago.

The U.S. president says the Canadian aluminum is flooding the U.S. which weighs on the U.S. industry. As a result, there is a danger to U.S. national security, which could justify any Trump’s actions. I won’t be surprised if the things will go on according to the scenario of 2018. At that time, Trump was imposing levies for many countries, is discontented with the U.S. trade deficit. In July, the Chinese exports to the U.S. increased by 12.5%, and the trade surplus grew from $29.41 billion to $32.48 billion. It seems that the U.S. is flooded not only with the Canadian aluminum but with the Chinese goods as well. Is it time to re- start the trade war?

Dynamics of Chinese foreign trade

![LiteForex: EURUSD forecast for 07.08.2020][1]

Source: Bloomberg

The US-China relations have been tense for a long time. The mutual closure of consulates by Washington and Beijing, Trump’s announcement of a 45-day deadline for American corporations to end business with the company that owns TikTok, the White House’s plans to delist Chinese companies from the U.S. stock exchanges unless they comply with U.S. audit requirements. All of this creates strong headwinds for the global economy. The trade war could be escalated after a half-year review of the parties’ fulfillment of their obligations under the Phase-1 trade deal signed in January. However, this is going to be another story, different from the old pattern.

In 2018-2019, trade battles strengthened the U.S. dollar amid the divergence in the trends of the [S&P500][2] and Shanghai Composite. Investors believed that the US would win the trade war and bought the dollar. However, the U.S. economy was much stronger at that time. Just six months ago, if someone told that the increase in the U.S. jobless claims by 1.2 million in the week through August 1 was good news, and the [EUR/USD][3] bears could draw the pair below the middle of figure 18, it would sound nonsense.

Dynamics of U.S. jobless claims

![LiteForex: EURUSD forecast for 07.08.2020][4]

Source: Bloomberg

Such a report keeps a chance of a positive report on U.S. employment in July. According to the forecasts of Reuters experts, the US nonfarm payrolls should grow by 1.58 million, which is much lower than 4.8 million new jobs in June. However, the greenback will try to use any positive news bit. Even in this case, the [EUR/USD][3] bears can still start a consolidation in the range of 1.169-1.179. Otherwise, if the U.S. jobs report is weaker than expected, the euro bulls can hope for a rally up to at least $1.192.

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Price chart of EURUSD in real time mode

![EUR/USD forecast: Dollar dreams about the past][7]

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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