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US dollar price forecast 15 December 2020

2020-12-15

2020-12-15

Dollar is gathering black swans. Forecast as of 15.12.2020Dmitri Demidenko

Next year, the USD index could drop by 15%, or the euro could go down to $1.06. Which of these forecasts will come true? Let us discuss the Forex outlook and make up a [EURUSD][1] trading plan.

Weekly US dollar fundamental forecast

While the [EURUSD][1] is jumping up and down, responding to the news about Brexit and the stimulus negotiation between Republicans and Democrats, large banks and international corporations scare the investors with shocking Forex forecasts. Standard Chartered presented a list of eight black swans that could shake financial markets in 2021. The company accurately predicted that the Fed would lower the federal funds rate in 2020, the gold price would reach $2000 per ounce, and was close to the [S&P 500][2] rally this year, suggesting a 20% rise. Therefore, it could make sense to consider its Forex projections.

Out of eight events, unlikely but still possible, I would like to consider three ones directly related to the [EURUSD][1] pair. According to Standard Chartered, the euro could go down to $1.06 by mid-2021 amid the disappointment of the EU fiscal stimulus and the ECB’s failure to provide the euro-area economic recovery because of the QE’s low efficiency. Otherwise, if Democrats and Republicans do not agree on the additional fiscal stimulus package, the US administration could abandon the strong dollar policy. In this case, the US Treasury could drop the USD index by 15% through currency interventions. The third black swan for the euro-dollar could become the resignation of Joe Biden. In this case, the [S&P 500][2] should crash, thereby strengthening the greenback.

Dynamics of [EURUSD][1] and USD index

Source : Trading Economics

The shocking projections convince only of one thing, the [EURUSD][1] can go both up and down, and those who don’t hedge against the risks could quickly go bankrupt. Projections are a matter of probability. Now, financial markets are focused on the global economic recovery amid the expectations of a soon victory over the pandemic. Yes, the US economy can also be expanding quite well, but the reflation environment will support risky assets’ demand. The major difficulties are the people’s reluctance to take vaccines and problems of transportation and vaccination. With this regard, the information about the growing share of American adults willing to get vaccinated is good news for the [EURUSD][1]. However, some states claim about insufficient funding, which is a negative factor.

The euro/dollar still depends on the Brexit results and stock indexes. Besides, investors do not think the FOMC December meeting can trigger a strong [EURUSD][1] move. Only 19% of the 47 experts polled by Bloomberg expect that the Fed will increase the QE size before the end of 2021. 32% of respondents, on the contrary, believe that the Fed should decrease.

Projections for changes in QE size

Source : Bloomberg

One out of three economists expects an extension of the emergency asset purchase program. However, only 23% of them suggest the Fed report this in December. The Fed is likely to explain the future QE pace by the unemployment and inflation rate, but it may not occur at the December meeting.

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

I don’t think the issues of Brexit and US fiscal stimulus will be settled before Christmas. Therefore, the pound volatility is likely to increase, while the [EURUSD][1] and [S&P 500][2] should stabilize. The euro could enter the consolidation range of $1.204-$1.224.

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