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Euro price forecast 10 November 2020

2020-11-10

2020-11-10

Euro is rolling down. Forecast as of 10.11.2020Dmitri Demidenko

The EURUSD drop has broken many laws of the market analysis. However, markets are growing on the rumors and falling on the facts. Speculators have exhausted the factor of Joe Biden’s victory. Let us discuss the Forex outlook and make up a [EURUSD][1] trading plan.

** Weekly euro fundamental analysis**

The euro crash has confused the world’s media. The press and analysts cannot really explain what happened in the trading session on November 9. The [EURUSD][1] has dropped to the bottom of figure 18 despite the continuous growth of the US stocks, strong yuan, and hopes for the global economy’s recovery. Positive news about the COVID-19 vaccine allowed the Dow Jones to break through the February highs; the [S&P 500][2] hit the second record high. The stock indices’ rally usually encourages investors to sell off safe-havens, which is evident from the Japanese yen’s drop. However, the dollar has surprisingly strengthened against the euro. What’s the matter?

Is the reason for the [EURUSD][1] drop in Asia? No, it isn’t. The yuan is the strongest ever. China expects Joe Biden to ease the tariffs imposed by Trump, which sends the renminbi up. Is Brexit the reason? No, it isn’t. Boris Johnson lost to parliament, which did not want to ratify his controversial internal market draft bill. The pound has increased in value, which usually supports the euro. Maybe, the euro has fallen because the EU introduced retaliatory tariffs on the US imports worth $4 billion after the WTO granted permission to do it as a countermeasure for illegal subsidies to Boeing. Do the markets worry about an EU-US trade war? I don’t think so; the total amount of tariffs is too small to result in a trade war.

Perhaps, the reason is the rumors about ECB’s aggressive monetary expansion in December? Bloomberg’s experts forecast the QE boost by €500 billion. Furthermore, European Central Bank Chief Economist Philip Lane said there’s still room to cut interest rates further. The markets expect pathetic speeches and active measures from Christine Lagarde and her colleagues. Nonetheless, it is not a new factor.

I believe the trading session on November 9 performed the working out of the investment idea that I have been writing about for several days already. The [EURUSD][1] forecasts were bullish, suggesting the euro should rise in cases of Biden’s victory (for example, the idea of dollar weakening amid the widening of the US twin deficit). That is why large traders utilized the strategy ‘buy on the rumors, sell on the facts.’ The greenback should have started growing despite the opinion of the majority. The main idea was to catch the crowd off guard, and it has worked perfectly. Next, speculators expect the correction to continue amid the deterioration of the euro-area epidemiological situation.

Dynamics of COVID-19 cases

Source : Bloomberg

The matter is that the positive news about the vaccine limits the euro’s correction. The victory over the coronavirus will allow canceling lockdown in Europe. I expect to repeat the history of the third quarter when the euro rose against the US dollar amid more effective management of the pandemic in the euro area than in the USA. The correction could go deeper only because of the pessimism about vaccines.

** Weekly[EURUSD][1] trading plan**

The [EURUSD][1] bulls failed to hold up the price above 1.188. [As expected][3], it resulted in a drawdown to the bottom of figure 18. If the price breaks out the support at 1.1795-1.18, it should roll down to 1.176 and 1.1725. Otherwise, if the pair goes up above 1.1865, it could well continue the rally.

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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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  1. my.liteforex.com/trading/chart?symbol=EURUSD&returnUrl=true
  2. my.liteforex.com/trading/chart?symbol=SPX&returnUrl=true
  3. www.liteforex.com/blog/analysts-opinions/dollar-is-set-back-by-euphoria-forecast-as-of-09112020/
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