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Forecast for euro price for 20 October 2020

2020-10-20

2020-10-20

If only euro could. Forecast for EURUSD for 20.10.2020Dmitri Demidenko

Despite the second wave of COVID-19 and the rumors of the ECB’s monetary stimulus expansion, the single European currency isn’t giving up. Let’s talk about what is supporting the euro, and make a trading plan for [EURUSD][1].

Weekly fundamental forecast for euro

In spite of, not thanks to.

[EURUSD][1]’s yesterday rise could seem strange amid the US stock indexes’ fall and the second pandemic wave in Europe. However, we need simply to understand, what investment idea is prevailing in the market these days. The euro’s descending move is seen as a mere correction. Most investors are sure that Joe Biden’s victory at the elections on 3 November will weaken the dollar, whereas the vaccine will give a boost to the whole global economy. In those circumstances, any hint at the pair’s growth appears to a be a reason for buying it. No one wants to miss the train that will go to the north sooner or later.

Formally, the reasons of [EURUSD][1]’s rally were Speaker of the US House of Representatives Nancy Pelosi’s statement that a fiscal stimulus deal is still likely to be made before the election, and the Fed’s dovish comments.

 If the Democrats and the Republicans agree on economic help, [S&P 500][2]’s rally may continue, the global risk appetite will improve, and the greenback’s position will worsen. Still, the market didn’t believe Pelosi: a deal would raise Trump’s rating. What do the Democrats need that for? Also, Pelosi’s statement sounded too ultimatum-like: if not on Tuesday, then never!

Fed’s Vice Chair Richard Clarida asserts that GDP’s pullback is connected in part with the Central bank’s and the Congress’ relief packages. He thinks that both the lawmakers and the Fed will need to provide additional support for GDP to continue recovering. Atlanta FED President Raphael Bostic believes that some areas of the US economy hardly ever recovered, or didn’t recover at all.

If the Fed is planning to provide an extra stimulus and GDP isn’t recovering, how can we speak about any divergence between monetary policy and economic growth, selling EURUSD in the short term?

During the fortnight ended on 13 October, hedge funds cut euro longs at the fastest pace over the last 8 months.

EURUSD and speculative positions in euro

Source: Bloomberg.

Still, speculative positions aren’t likely to become net shorts: the negative US assets yield and Joe Biden’s probable victory don’t allow investors to buy out dollars.

The Chinese yuan’s consolation may suggest the reasons of [EURUSD][1]’s rise to the top of figure 17. In spite of the People’s bank’s intention to put a spoke into [USDCNH][3] bears’ plans, the pair returned to the area of its 18-month lows and is ready to update them. That will draw it to the lowest value since July 2018. Investors overestimated the negative impact of China’s GDP’s moderate growth in Q3, and paid attention to strong statistics on industrial production and retail sales.

Weekly trading plan for [EURUSD][1]

I mentioned the yuan’s impact on the euro rate many times. Nevertheless, the eurozone’s domestic problems will prevent [EURUSD][1] from continuing the rally. The market is concerned about October’s data on European PMI. Most likely, the traders will be selling the euro at $1.178, $1.181 and $1.185 in the nearest time.

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Price chart of EURUSD in real time mode

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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