Logo

Posts

EURUSD forecast for 21.08.2020

August 21, 2020

August 21, 2020

EUR/USD forecast: Euro took up mathDmitri Demidenko

Fundamental Euro forecast for today

Open EUR/USD position according to the euro-area PMI data

Financial markets base on mathematics. The divergence in the economic growth, having supported the [EUR/USD][1] bulls during the summer, looked like an equation with one unknown. A better epidemiological situation in Europe than in the USA has almost convinced investors that the euro-area economy will be recovering faster than the US GDP. As a result, the rise of the major currency pair depended on the US economic data. A better economic performance, together with the Fed’s unwillingness to ease its monetary policy (which signals hidden optimism), sent the euro down to $1.18. However, once there appeared some negative, the euro bulls went ahead.

The US jobless claims are again back to a level of above 1 million, the manufacturing PMI data reported by the New York Fed and Philadelphia Fed are weak. These reports show that the US economy is not revering as rapidly as the dollar buyers would like. I have many times stressed that the market turns out to be more fundamental amid the interest rates of the world’s leading central banks, which are close to zero. Investors are quite responsive to the reports on the US domestic data, especially since the US economy has been that unknown in the growth- gap equation.

The experts’ projections for the euro-area economy have been optimistic. In my opinion, too optimistic. Since the French-German stimulus plan was adopted, the euro risk reversals have been up by 60-80 basis points. The indicator has increased so rapidly only three times since the records began in 2006, and each time, the [EUR/USD][1] was up by 5% and more in a few net months. There is an increased demand in the options market for call options with strikes of 1.22, 1.23, 1.25, and even 1.28.

Demand for euro-dollar options

![LiteForex: EURUSD forecast for 21.08.2020][2]

Source : Bloomberg

Investors completely forgot that an equation with one unknown could transform at any moment into an equation with two unknowns. In Europe, the second wave of the pandemic unfolding. In Spain, about 4,800 new COVID-19 cases are registered per day, which is the highest since April; in France, the number of coronavirus cases has increased by 50% in a week, in Germany, the figure has exceeded 1,500, the highest since early May. Yes, European relative indicators still fall short of the US, where 150 cases for 1 million of the population (in problematic Spain, there are 110 cases for 1 million), Yes, most infected are young people. Hence, the number of hospitalizations and deaths is small, but who knows how the situation will develop further?

The difficulties will increase amid the expiration of programs to retain the non-working population in the labor force, which could result in a surge in unemployment and weigh on the consumer activity. The ECB stressed this problem at its July meeting, the central bank is willing to expand QE if necessary. It is a bearish factor for the [EUR/USD][1], but traders ignored it. The euphoria about the euro is still present and could end up bad for the euro buyers. The uncertainty about the euro- area economic recovery increases the risk that the euro will roll down to $1.18 if the euro-area PMI data for August are weak.

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][3]. 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][4] 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: Euro took up math][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.

Rate this article:

{{value}}

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

  1. my.liteforex.com/trading/chart?symbol=EURUSD&returnUrl=true
  2. cdn.liteforex.com/cache/uploads/blog_post/eurusd/options-21-08-20.jpg?w=30&s=21db1e49f252149c2489f6f03fdb1b60
  3. my.liteforex.com/?category=analysts-opinions&slug=eurusd-forecast-euro-took-up-math&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
  4. my.liteforex.com/deposit/?category=analysts-opinions&slug=eurusd-forecast-euro-took-up-math&promo_code=BLOG&utm_source=blog&utm_medium=article&utm_campaign=bonus
  5. cdn.liteforex.com/cache/uploads/blog_post/eurusd/liteforex-blog-eurusd-21-08-20.jpg?q=75&w=1000&s=66f649c0780b61ae0388b20708eb33e5