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EURUSD forecast for 25.08.2020

August 25, 2020

August 25, 2020

EUR/USD forecast: Euro is scared of heightsDmitri Demidenko

Fundamental Euro forecast for today

Isn’t EUR/USD trading too high?

The Forex market is always changing! In winter, the news about progress in the US-China would strengthen the euro. In spring, the US stock market rally would support the [EUR/USD][1] bulls. At the end of summer, however, the euro isn’t rising amid the US optimistic announcements about making a deal with China. It isn’t rising although the [S&P500][2] has hit a fresh high on the news about the accelerated approval of vaccines and the use of blood plasma to treat critically ill COVID-19 patients. Isn’t the euro trading too high?

Although Donald Trump claims he does not want to talk with China and does not rule out a complete break in relations with this country, US and Chinese officials discussed the status of the trade deal. Chinese Vice-Premier Liu He spoke with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to discuss further action needed to make progress on the trade deal. Such a tone suggests the White House still wants to reach an agreement with China.

Beijing has fallen behind its first-year commitment. Nonetheless, the recovery of China’s economy, growing domestic demand, and the unwillingness to inflame tensions with Washington suggest that there won’t be a new round of trade wars.

China’s commitments on increasing its purchases of US products

![LiteForex: EURUSD forecast for 25.08.2020][3]

Source : Bloomberg

Donald Trump doesn’t want to resume the trade battle ahead of the US presidential election. Joe Biden has already accused him of the failure of his policy with Beijing, so he wouldn’t give his opponent another reason for criticism. China doesn’t want new tariffs. China’s economy, unlike most advanced economies, will expand in 2020. JP Morgan increased the forecast for the Chinese GDP in 2020 from 1.3% to 2.5%. The US GDP, for example, should contract by 8% this year.

The continuous rise of the US stock indexes and progress in US-China trade relations supported Trump’s approval ratings, which could be a reason for the [EUR/USD][1] correction. What is good for Trump is good for the US dollar.

Dynamics of Trump’s approval rating and USD

![LiteForex: EURUSD forecast for 25.08.2020][4]

Source : Nordea Markets

But still, the primary reason for the euro drawdown is likely to be the second wave of the pandemic in Europe. The ratio of the COVID-19 cases in Europe and the US peaked in early August, but the situation has changed since then.

Dynamics of EUR/USD and US-Europe COVID-19 case count

![LiteForex: EURUSD forecast for 25.08.2020][5]

Source : Nordea Markets

If the [EUR/USD][1] breaks out supports at 1.178 and 1.1755 could suggest entering short-term sell trades. One should not hold the shorts for too long, in my opinion. Many euro’s growth drivers still work out, and the deterioration of the euro-area epidemiological situation will hardly last for a long time.

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Price chart of EURUSD in real time mode

![EUR/USD forecast: Euro is scared of heights][8]

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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