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Euro price forecast 16 November 2020

2020-11-16

2020-11-16

Euro believes in vaccine. Forecast as of 16.11.2020Dmitri Demidenko

Despite the short-term troubles, the EURUSD is rising amid the general euphoria. Won’t the disappointment come next? Let us discuss the Forex outlook and make up a [EURUSD][1] trading plan.

** Weekly euro fundamental forecast**

People drive the markets. The unexpected moves of asset prices often result from people’s puzzling decisions. The entire world is inspired by the positive results of the COVID-19 vaccines, and the [S&P 500][2] hits fresh highs. Why has Pfizer CEO Albert Burla sold shares of $ 5.6 million in the pharmaceutical company? Does he want to sell at good prices when everybody is buying? Or does he not believe in the vaccine? If so, the disappointment could soon replace the market euphoria.

The hopes for a soon economic rebound are pushing up the stock indexes and the [EURUSD][1]. The Bloomberg data suggest a sharper downturn of the euro-area PMI than that of the US in the first weeks of November. Furthermore, the number of new coronavirus cases in Europe is higher than in the USA. Despite all the negative factors, the euro is growing.

**Dynamics of[EURUSD][1] and the change in the COVID-19 cases **

Source : Nordea Markets

Investors believe in the economic recovery. The progress in the vaccine development and the hopes for a V-shaped recovery of the US GDP allow Morgan Stanley to recommend investors to continue buying stocks and corporate bonds and selling Treasuries and the US dollar. According to the company’s forecast, the USD index will drop by 4% by the end of 2021. JP Morgan and Goldman Sachs are also optimistic. They suggest that the US presidential election results and the gradual improvement of the epidemiological situation will support the growth of the stock.

The trust in the vaccines implies that the global PMI will continue increasing despite the second pandemic wave. The correlation between the PMI and the Treasury yields means a big growth potential of the US bond market. The lesson learned from the current recession suggests that it’s better to ignore the growing debt and continue selling money rather than saving it up. Extensions of the issue volumes will encourage investors to withdraw the money from the secondary market and spend it in the initial market. In addition to the hopes for the global GDP recovery, this fact will send the yields up.

Dynamics of the global PMI and Treasury yields

Source : Nordea Markets

Italy is willing to issue bonds in US dollars at a rate of 165 basis points higher than their euro-area peers. Why should a country pay more when it can borrow cheaper in its own currency, not to mention cheap loans from the European Stability Mechanism? Italy needs money. If there is demand, why not sell the securities at a higher price?

The higher risk appetite and growing bond yields are a positive factor for the [EURUSD][1].

**Dynamics of the[EURUSD][1] and bond yields **

Source : Nordea Markets

Weekly [EURUSD][1] trading plan

Therefore, if Pfizer’s vaccine really saves the world from the pandemic, the global economic recovery promises good profits for the euro buyers. However, one should be cautious when holding the [EURUSD][1] longs entered at [level 1.18][3]. If the [S&P 500][2] goes down, the traders will start selling the euro.

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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/euro-and-fun-isolation-forecast-as-of-12112020/
  4. my.liteforex.com/?category=analysts-opinions&slug=euro-believes-in-vaccine-forecast-as-of-16112020&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
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