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US dollar price forecast 17 November 2020

2020-11-17

2020-11-17

Dollar doesn’t like Tesla. Forecast as of 17.11.2020Dmitri Demidenko

The news about coronavirus vaccines allowed the [S&P 500][1] to hit all- time highs, supporting the risk appetite and sending the [EURUSD][2] up. How long will it last? Let us discuss the Forex outlook and make up a trading plan.

** Weekly US dollar fundamental forecast**

We should never forget 2020. However, financial markets seem to have forgotten it. Despite Wall Street experts’ forecasts, suggesting the market turmoil following the US presidential election, the [S&P 500][1] hits fresh highs. The US stocks are again rising amid the news about the COVID-19 vaccine. This time, Moderna offers a vaccine that demonstrated 95% efficiency. This vaccine performs better than the products developed by Pfizer and BioNTech. However, the stock index featured a weaker growth, which suggests the momentum exhaust and the [EURUSD][2] rally is limited.

**[S&P 500][1] reaction to the news about vaccines **

Source : Wall Street Journal

The higher rises the [S&P 500][1], the more experts talk about a correction. The epidemiological situation in the USA is deteriorating. The number of hospitalizations has reached a record high of 73,000. Over the last week, 1129 people died on average, which is the highest rate since August. Besides, 53 Reuters experts out of 57 believe that the coronavirus is the US economy’s major problem, rather than the uncertainty about the ultimate voting results.

I suppose these two matters are related. Joe Biden says even more people will die from COVID-19 unless he and the new US administration soon take up their duties. Donald Trump continues a series of controversial tweets. Trump tweets Biden ‘won because the election was rigged’ and then he writes ‘We will win.’

So, the USA’s epidemiological situation is tough; Trump refuses to concede and rejects the voting result. These are the arguments for a soon [S&P 500][1] correction down. Another bearish factor is the uncertainty around the new fiscal stimulus package. Old financial aid programs expire on January 1. According to Deutsche Bank, the end of the programs will reduce consumer incomes by $150 billion in the first quarter of 2021, pressing the GDP down by 1%.

On the other hand, the US stock buyers have some arguments for the rally continuation. The Fed provides huge volumes of cheap liquidity, investors hope for a soon recovery of the US economy amid the introduction of COVID-19 vaccines. Furthermore, Tesla stock is to join the [S&P 500][1] index in December. Since the beginning of 2020, the [S&P 500][1] has been 12% up, which is quite an impressive performance considering the pandemic. However, the [Nasdaq 100][3] has been 38% up due to the Tesla company. The [S&P 500][1] should catch up.

Dynamics of the US stock indices

Source : Bloomberg

Weekly [EURUSD][2] trading plan

I deliberately focus on the US stock market in my euro-dollar analytics. The US stock indexes determine the global risk appetite, which is the key driver for all dollar pairs, including the [EURUSD][2]. If the euro breaks out the resistance at $1.1865-$1.188, it should continue the rally towards $1.1955-$1.1965. If the EURUSD bounces down from the resistance, the correction should continue down to 1.18 and 1.1765.

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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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