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Euro price forecast 30 November 2020

2020-11-30

2020-11-30

Euro looks beyond the shock. Forecast as of 30.11.2020Dmitri Demidenko

The divergence in the economic expansion is an important driver of Forex pricing. It seems to be in favor of the USA. Actually, it is not so. Let us discuss the Forex outlook and make up a [EURUSD][1] trading plan.

** Monthly euro fundamental forecast**

A year ago, trade was the source of investors’ concerns, and the strong domestic data were reassuring. Things have changed. Eurozone and the UK have the largest gaps between manufacturing and services PMIs over the last 25 years. The domestic demand is far behind the foreign demand, spurred by China. This is true not only for Europe but for the entire world. That is the major reason for the [EURUSD][1] rally.

The euro rally up to $1.2 seems to refute the main fundamental analysis principle: strong economy – strong currency. Economic sentiment in the eurozone fell in November for the first time in seven months, and leading indicators from Bloomberg suggest a serious downturn in the economies of Germany, France, Italy, and Spain. The Bloomberg consensus forecast suggests a 4% expansion in US GDP in the fourth quarter, while the currency bloc is likely to face a double-dip recession. What’s the matter? Why is the [EURUSD][1] growing despite the growth-gap?

Dynamics of euro-area economic sentiment

Source : Bloomberg

Dynamics of the recovery in the world’s largest economies

Source : Bloomberg

Like in the US stock market, the Forex traders look beyond the shocks. If international trade is no longer the source of worries, and it becomes the primary growth driver, what regions will benefit the most from the victory over the pandemic and global GDP recovery? They will be the economies led by foreign demand! First of all, it is the euro area where the exports share in the GDP is over 40%, while in the USA, exports account for 15% of the GDP. The US dollar was growing amid trade wars and US strong domestic demand in 2018-2019. Likewise, the euro will be strengthening in 2021 amid the increase in the international trade volume.

The [EURUSD][1] purchases are quite promising. The European companies’ stocks in foreign and domestic demand sectors are still lagging behind their US peers. However, the situation will radically change as the global GDP recovers. The capitals outflows from the USA to Europe and hedging against currency risks by foreign investors, holding the US securities, will support the euro’s further growth,

Dynamics of stocks of euro-area and US companies

Source : Wall Street Journal

Monthly [EURUSD][1] trading plan

Therefore, the current growth-gap between the US and the euro area is temporary. Investors see beyond the current economic data and bet on the international trade increase led by China. The surge in the Chinese manufacturing PMI up to the highest level since 2017 encouraged the [EURUSD][1] bulls to drove the price close to 1.2.

Under the current conditions, one could buy the euro either on the corrections down to $1.1885 and $1.1835 or on the breakout of the resistance zone of $1.1975-$1.198. The euro can well reach the level of $1.22 already in December-January.

[EURUSD][2] current rate in the Forex market:

EURUSD = 1.19290

1-day change

-0.00315 (-0.26%)

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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.lite.forex/trading/chart?symbol=EURUSD&returnUrl=true
  3. my.liteforex.com/?category=analysts-opinions&slug=euro-looks-beyond-the-shock-forecast-as-of-30112020&openPopup=%2Fregistration%2Fpopup