Home Forex EUR/USD Outlook Bearish as Second Wave of Covid-19 Hits Europe

EUR/USD Outlook Bearish as Second Wave of Covid-19 Hits Europe

by kyngsam

Chart created with TradingView

Basic Euro Forecast: Bearish

  • Nations throughout Europe are reporting a resurgence in Covid-19 infections after a quick lull, though that might be due merely to elevated testing.
  • If confirmed, the European economic system might not outperform the US in the way in which beforehand anticipated, and that would harm EUR/USD, significantly if pessimism concerning the EU economic system prompts skilled merchants to cut back their lengthy positions additional.

Euro value liable to setback

A second wave of the Covid-19 pandemic seems to be hitting Europe, forcing traders to rethink the narrative that the European economic system will undergo much less harm from the virus than the US economic system. Whereas the newest rise in an infection numbers might be due merely to elevated testing, the concern is that it’s going to immediate additional damaging lockdowns.

That could be a clear damaging for EUR/USD and might be magnified if extra traders determine to reply by decreasing additional their lengthy positions within the pair. Because the chart beneath reveals, professionals have been lengthy EUR/USD since March however have been reducing their long positions in recent weeks.


Supply: CFTC CoT Report(You’ll be able to click on on it for a bigger picture)

If that pattern persists, EUR/USD might properly dip to the lows at 1.1611 and 1.1613 recorded on September 25 and September 28, and maybe slightly below there to 1.16 or 1.1596, the place the 100-day shifting common checks in.

EUR/USD Worth Chart, Day by day Timeframe (July 15 – October 15, 2020)

EURUSD Price Chart

Supply: Refinitiv (You’ll be able to click on on it for a bigger picture)

EUR Forecast

EUR Forecast

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Confidence information on the agenda

The complete affect on the Eurozone economic system of the Covid-19 pandemic within the three months July-September is not going to be recognized till October 30, when “flash” preliminary third-quarter GDP information are launched. This coming week, nonetheless, is a vital one for confidence indicators suggesting the extent to which sentiment has been broken by the prospect of a second wave.

German and Eurozone shopper confidence numbers, and French enterprise confidence information, are all launched Thursday. The subsequent day they are going to be adopted by flash October buying managers’ indexes, and any indicators of worse-than-expected weak point might make the outlook for EUR/USD much more bearish.

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— Written by Martin Essex, Analyst

Be at liberty to contact me on Twitter @MartinSEssex

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