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Euro price forecast 10 February 2021

2021-02-10

2021-02-10

Euro and Draghi effect. Forecast as of 10.02.2021Dmitri Demidenko

Mario Draghi used to rein the euro by just a single word. The former ECB president now faces a different challenge, but investors remember his financial markets’ impact, so the [EURUSD][1] is growing. Let us discuss the Forex outlook and make up a trading plan.

Weekly euro fundamental forecast

Financial markets trade reflation and enjoy the process. The [S&P 500][2] has broken through the all-time highs eight times in 2021 amid the trust in vaccines and fiscal stimulus provided by Joe Biden, as well as strong corporate reporting. According to FactSet, out of the 295 reported companies included in the stock index calculation base, 81% exceeded analysts’ expectations for earnings growth. In January, the US stock market and [EURUSD][1] were trading in the opposite directions due to concerns about too slow vaccination progress in Europe. In February, the [S&P 500][2], as in the good old days, again supports the euro bulls.

Source : Trading Economics

According to Citi, when the stock index reaches level 4000, investors could start exiting longs, triggering a drawdown. Nonetheless, the US stock market is exposed to a risk of short squeezing, the short-sellers’ positions of $21 billion are losing, and their closures will encourage bulls.

Besides, the US stock market rally and the associated increase in the risk appetite are not the only drivers of the [EURUSD][1] growth. Amid a decrease in the COVID-19 cases as the seasonal peak is over, investors accepted that the vaccination progresses slower in Europe than in the USA. After all, the economies will be reopened when the coronavirus is defeated, which is now happening without vaccines. The Mario Draghi factor also strengthens the euro.

The importance of personality in history is difficult to overestimate. Financial markets welcomed Draghi’s return to big politics. Italy’s benchmark 10-year bond yield slipped below 0.5 % for the first time. Spain raised €5 billion in debt sale at a coupon of 1.45 %. This was the country’s first 50-year deal since 2016 when buyers demanded a much higher borrowing cost of 3.45 %. Buyers are exited amid a slowdown of the ECB’s asset purchases monthly pace to €15 billion, which suggests the Draghi effect. A super-Mario-led government pursuing pro-European reforms could increase the prospects for complex changes to EU fiscal rules, which in turn will boost Italy’s economic growth.

Furthermore, the euro’s correction down lowered the risks of the ECB’s verbal interventions. The trade-weighted euro rolled down even deeper than the [EURUSD][1].

Dynamics of [EURUSD][1] and trade-weighted euro

Source : Nordea Markets

Therefore, the [S&P 500][2] rally, a seasonal decline in the number of COVID-19 cases, and the Draghi effect encourage the euro bulls to go ahead. Investors ignore the factor of the slow vaccination process in the EU, where 4% of the population were inoculated, compared to the US (13.5%). Markets hope for the explosive growth of the global economy.

Weekly [EURUSD][1] trading plan

The [EURUSD][1] broke out the resistance level at 1.208 and reached the first target, indicated in the [previous analytics][3], at 1.2125. The next upside targets are at 1.215, 1.221 and 1.225. If the [S&P 500][2] continues growing in price, the euro bulls will achieve the indicated targets within a few days. It is still relevant to enter longs.

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-remembers-everything-forecast-as-of-09022021/