EURUSD forecast for 20.08.2020

August 20, 2020

EUR/USD forecast: Fed saves the dollarDmitri Demidenko

Fundamental US dollar forecast for today

US central bank won’t ease monetary policy

One quickly gets used to good things. Massive injections of liquidity to manage the recession resulted from the pandemic allowed investors to call the Fed insane. They hoped that it would continue. However, the minutes of the FOMC July meeting proved that the central bank acts wisely. The Fed is not stupid; it is rather sensible, willing to work according to the circumstances. When the market’s expectations are not met, traders start exiting trades, which results in a correction. The [EUR/USD][1] is no exception.

Investors bet that the Fed would signal its willingness to put up with the inflation above the 2% target, to start yield curve control policy, and, finally, to lower the interest rates below zero. Nothing like that happened. The central bank, which had previously announced that it was considering the control of the US Treasury yield, noted in the minutes that this was not necessary. Officials insist that the Fed’s monetary policy is already ultra-easy, so if the economic situation, it will focus on the duration of keeping interest rates at current levels. The interest rate hike depends on the targets on inflation and unemployment.

Dynamics of US inflation

![LiteForex: EURUSD forecast for 20.08.2020][2]

Source : Bloomberg

Fed seems to be unwilling to ease monetary policy and hinder the growth of the US Treasury yield. If so, the US dollar should benefit from the more robust US domestic data, which would lead to the rise of the bond rates. And there are positive changes already! They are yet surprising amid the problematic situation with the COVID-19. However, they could be seen as a regularity soon.

The crucial error of economists that they expected people to avoid spending during hard times. However, online shopping, mobile apps, fiscal stimulus, and the boredom during the lockdown resulted in the growth in revenue of major American retailers. It means the US retail sales, consumer demand, and the GDP data will be secure.

Revenues of US retailers

![LiteForex: EURUSD forecast for 20.08.2020][3]

Source : Bloomberg

The White House has the same opinion. Its mantra about the V-shaped recovery of the US economy seemed ridiculous not long ago. White House chief economic adviser Larry Kudlow still claims that the US GDP is recovering very fast, and the cut in the unemployment benefits from $600 to $300 per week means the US economy is getting stronger. So, the US economic data are positive; the [S&P500][4] hits fresh all-time highs, the Fed doesn’t sound more dovish than earlier. These factors raise doubts in such a driver as the divergence in the economic growth between the euro area and the US. It makes the [EUR/USD][1] correction more likely.

After an impressive three-month rally, the euro bulls need a rest. If the [EUR/USD][1] goes below 1.1815-1.182, it could continue falling towards 1.1755, 1,.1725, and 1.1675, which should be followed by the middle-term consolidation.

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][5]. 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][6] 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: Fed saves the dollar][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.

Rate this article:

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