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Euro price forecast 20 November 2020

2020-11-20

2020-11-20

Euro gave in to compliments. Forecast for 20.11.2020Dmitri Demidenko

When Citi, Goldman Sachs, Morgan Stanley, and other large banks suggest the EURUSD growth to at least 1.25 in 2020, it is difficult not to buy the euro. Is it relevant to buy the EURUSD now? Let us discuss the Forex outlook and make up a [EURUSD][1] trading plan.

Fundamental euro forecast for today

After me, the deluge. Treasury Secretary Steven Mnuchin said he would allow several emergency Federal Reserve lending programs to expire on December 31. The Fed is disappointed with this decision that has a political connotation. Donald Trump, leaving the White House, spares no effort to hinder the new US president’s reforms. The US central bank would prefer that the full package of emergency programs created during the pandemic continue to play its important role as a pillar of the U.S. economy that is still fragile. The dispute between the US government and the Fed, followed by the good news about the negotiations’ resumption on the fiscal stimulus, made the [EURUSD][1] ride a roller coaster.

Since March, the Fed has deployed thirteen credit lines to provide the companies and municipalities with cheap money. The programs enabled the central bank to pump trillions of dollars into financial markets by purchasing corporate bonds and local government debt. The Treasury allocated money to cover losses. However, twelve credit lines expire on December 31, which creates another political conflict, puts pressure on stocks, and supports the greenback as a safe-haven asset.

On the other hand, those who bet on the US dollar amid the US economy’s leading performance should be discouraged. According to Jerome Powell, it is inappropriate to allow the completion of emergency lending programs. The Fed will remove the lending programs at the right time, but it won’t happen soon. Robert Kaplan, president of the Dallas Fed, said he would not rule out the possibility that the economy slips back into recession. Cleveland Fed President Loretta Mester argues that the US economy needs new financial support from the government. The same idea is expressed by the IMF, warning that global GDP could stop recovering without additional aid. Although global PMIs have increased since July, there are signs that the process is losing momentum. The crisis will leave dramatic economic fallout.

Dynamics of global PMIs

Source : Bloomberg

The International Monetary Fund notes that the rise in asset prices is out of touch with reality. Investors do not consider the actual state of the economy, which creates a potential threat to financial stability. I have many times emphasized that the US stock market is overvalued. The [S&P 500][2] drawdown will send the [EURUSD][1] down.

[EURUSD][1] trading plan for today

Investors are prone to believe in the euro bullish forecasts. They see any positive news bit for the US stock indices as a reason to be the euro. For example, Senate Majority Leader Mitch McConnell has agreed to resume talks over a potential coronavirus relief bill on November 19. Citi doesn’t rule out the USD drop by 20% in 2021; Goldman Sachs sees a 6% drawdown of the trade-weighted dollar; Morgan Stanley suggests the [EURUSD][1] growth to 1.25. That is why investors are in a hurry to buy the euro now. If the pair breaks out the resistance at 1.188-1.189, it should continue the rally up to 1.192 and 1.1955. However, one should be extremely careful when entering longs.

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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
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