EURUSD forecast for 01.09.2020

September 1, 2020

EUR/USD forecast: Euro trusts in foreign factors, but keeps its powder dryDmitri Demidenko

Fundamental Euro forecast for today

The EUR/USD uptrend is based on both domestic and foreign factors

In March, when the euro was trading close to the bottom of figure 6 and pessimists projected it to be in parity with the US dollar, nobody thought that the [EUR/USD][1] would reach 1.2 in late August. The euro has been rising versus the dollar for four consecutive months, and it has reached the highest levels since May 2018. The rally of the US stock indexes, making investors get rid of safe havens, a dovish shift in the Fed’s stance, and the global economic recovery, including the rebound of China’s growth, allowed the euro bulls to control the market.

The [S&P 500][2] rally has pointed to the best August performance since 1986. It rose amid massive fiscal stimulus, the signs of the US economic rebound, and positive news about COVID-19 vaccines. The US stock market has increased by 35% over that period, its largest five-month percentage gain since 1938. The US stock indexes also grew because of the greenback weakness. According to Goldman Sachs, every 10% of the USD drop increases the earnings per share of the [S&P 500][2] companies by 3%.

Dynamics of S &P 500

![LiteForex: EURUSD forecast for 01.09.2020][3]

Source : Wall Street Journal

In addition to the increase in the global risk appetite, another growth driver for the [EUR/USD][1] is the divergence in the economic expansion. The dollar usually loses to major world currencies if the US GDP growth is slower than its global peer. Therefore, the euro should strengthen if China becomes the world’s economic leader. The Chinese PMIs have been above 50 for the sixth consecutive months, which signal the GDP expansion. Besides, the services PMI has been the highest over the past 2.5 years. China’s growth outperforms the advanced economies, which supports the yuan. The Chinese yuan to the US dollar exchange rate has hit its highest value for more than a year. The drop of the USD/CNY, suggesting the growth of the foreign demand, is a positive factor of the export-led euro-area economy, and so for the euro.

Dynamics of yuan and euro

![LiteForex: EURUSD forecast for 01.09.2020][4]

Source: Trading Economics

I can’t say that Europe is supported only by foreign factors. The EU governments and the ECB take active measures to support the rebound of the euro-area economy. Fiscal and monetary stimuli, in addition to effective management, give hope for a quick GDP resound. According to Bloomberg’s sources familiar with the matter, Germany’s government should revise its forecasts. It says the economic fallout from the coronavirus will be smaller than previously expected this year. The previous projections of the German government suggested the economy would contract by 6.3%.

Investors believe that the [EUR/USD][1] global uptrend will continue. However, the euro bulls could be held back in the short run. There are several reasons. First, US economic performance is improving. Besides, Joe Biden’s lead over Donald Trump among registered voters has significantly narrowed. Finally, some forex analysts suggest that the ECB can follow the Fed’s example and target the average inflation. We shall see if the [EUR/USD][1] will break out the resistance levels of 1.2025 and 1.2065.

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: Euro trusts in foreign factors, but keeps its powder dry][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}} )