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

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EURUSD Price Chart

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Fundamental Euro Forecast: Bearish

  • Countries across Europe are reporting a resurgence in Covid-19 infections after a brief lull, although that could be due simply to increased testing.
  • If confirmed, the European economy may not outperform the US in the way previously expected, and that could damage EUR/USD, particularly if pessimism about the EU economy prompts professional traders to reduce their long positions further.

Euro price at risk of setback

A second wave of the Covid-19 pandemic appears to be hitting Europe, forcing investors to rethink the narrative that the European economy will suffer less damage from the virus than the US economy. While the latest rise in infection numbers could be due simply to increased testing, the fear is that it will prompt further damaging lockdowns.

That is a clear negative for EUR/USD and could be magnified if more investors decide to respond by reducing further their long positions in the pair. As the chart below shows, professionals have been long EUR/USD since March but have been reducing their long positions in recent weeks.

EURUSD Chart

Source: CFTC CoT Report(You can click on it for a larger image)

If that trend persists, EUR/USD could well dip to the lows at 1.1611 and 1.1613 recorded on September 25 and September 28, and perhaps just below there to 1.16 or 1.1596, where the 100-day moving average checks in.

EUR/USD Price Chart, Daily Timeframe (July 15 – October 15, 2020)

EURUSD Price Chart

Source: Refinitiv (You can click on it for a larger image)

EUR Forecast

EUR Forecast

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Confidence data on the agenda

The full impact on the Eurozone economy of the Covid-19 pandemic in the three months July-September will not be known until October 30, when “flash” preliminary third-quarter GDP data are released. This coming week, however, is an important one for confidence indicators suggesting the extent to which sentiment has been damaged by the prospect of a second wave.

German and Eurozone consumer confidence numbers, and French business confidence data, are all released Thursday. The next day they will be followed by flash October purchasing managers’ indexes, and any signs of worse-than-expected weakness could make the outlook for EUR/USD even more bearish.

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— Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex





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Forex

Dollar Edges Higher After Presidential Debate By Investing.com

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© Reuters.

By Peter Nurse

Investing.com – The dollar posted small gains in early European trade Friday, following the final presidential debate between U.S. President Donald Trump and Joe Biden before the Nov. 3 election.

At 2:55 AM ET (0655 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 93.082, bouncing back from the seven-week low seen earlier in the week. However, it remains 0.6% lower for the week.

Elsewhere, was down 0.2% at 1.1793, fell 0.2% to 1.3054, while was down 0.1% at 104.72.

The final debate between the two presidential candidates took place in Nashville, Tennessee late Thursday and was more restrained than the chaotic first debate, with the debate centering more on policy rather than personal attacks.

That said, “people are just closing out longs ahead of the election just in case Biden isn’t [elected] … we’re coming into that eye of the storm now where it takes a bit of a brave soul to put on new positions ahead of the election,” Pepperstone head of research Chris Weston told Reuters.

Traders are also keeping an eye on negotiations between House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin over the potential for a new substantive coronavirus relief bill, with Pelosi expressing optimism that a consensus could be reached.

“Market players will take their cue from U.S. political developments as well as the sustained acceleration in Covid-19 cases around the globe as the fall ushers in a new wave of infections as predicted by experts,” said analysts at ING, in a research note.

Elsewhere, was largely flat at 6.6843, with the yuan holding onto gains against the greenback as Wang Chunying, spokeswoman for China’s State Administration of Foreign Exchange, told a news conference that the yuan has been more stable than expected. This comes despite the Chinese currency reaching its highest level against the dollar in 27 months on Wednesday.

The Chinese currency could see sharp gains if Joe Biden wins November’s U.S. presidential election, according to Citigroup (NYSE:) strategists. Chinese exporters would expect a more predictable U.S.-China trade relationship in that circumstance, and will start selling their dollar cash piles to buy yuan, the strategists wrote in a note dated Thursday.

Additionally, rose 0.2% to 7.9478, the day after Turkey’s central bank raised the upper bound of its interest-rate corridor but unexpectedly left its benchmark rate on hold.

The central bank surprised investors last month with a 200-basis-point increase and has since tightened policy further by restricting funding at the benchmark rate, forcing banks to borrow using costlier options. 

But this hasn’t stopped the currency’s decline, with the lira falling another 2% against the dollar since the September rate decision.

“Exchange rate developments are likely to remain as one of the key determinants of CBT policy in the period ahead given ongoing geopolitical issues and US elections-related sensitivities,” ING added.

 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Both sides want EU trade deal but UK sovereignty must be respected

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© Reuters. FILE PHOTO: Chief Secretary of the Treasury Stephen Barclay is seen outside Downing Street in London

LONDON (Reuters) – A Brexit trade deal is in both sides interests but can only happen if the European Union respects British sovereignty over fisheries, UK junior finance minister Stephen Barclay said on Friday.

Asked if there would be a deal, Barclay said: “I hope so.”

“But that deal needs to reflect that fact that we’re leaving the EU, we will regain control of our fisheries – it was a key issue for many of your viewers during the Brexit debate and it is important that the deal reflects that,” he told Sky News.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Dollar Up, Ending Tough Week, Investors Digest Trump-Biden Debate By Investing.com

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© Reuters.

By Gina Lee

Investing.com – The dollar was up on Friday morning in Asia, ending a tough week as it saw losses against the euro and its largest weekly drop against the yen in a month. U.S. President Donald Trump and Joe Biden participated in a restrained final presidential debate before the Nov. 3 presidential election earlier in the day.

The that tracks the greenback against a basket of other currencies inched up 0.08% to 93.043 by 1:02 PM ET (5:02 AM GMT). Although the dollar remained above Wednesday’s seven-week low, it was down 0.7% for the week and remained in the bottom half of a months-long range.

Trump adopted was more restrained that during the first presidential debate on Sep. 29, where he constantly interrupted both Biden and moderator Chris Wallace.

Bookmaker Ladbrokes (LON:) tweeted that betting markets showed a small movement in Trump’s favor in the immediate aftermath of the debate. However, some investors expected caution and no big moves ahead of the election.

“People are just closing out longs ahead of the election just in case Biden isn’t [elected] … we’re coming into that eye of the storm now where it takes a bit of a brave soul to put on new positions ahead of the election,” Pepperstone head of research Chris Weston told Reuters.

The pair edged down 0.11% to 104.70. The yen saw its highest weekly rise since mid-September, reversing some overnight losses after House of Representatives Speaker Nancy Pelosi expressed optimism about a consensus on the latest stimulus measures. Investors also turned to the safe-have yen over the anticipated turbulent trade ahead of the election.

The pair inched down 0.04% to 0.7112. Across the Tasman Sea, the pair inched down 0.10% to 0.6667. New Zealand released a weaker-than expected consumer price index earlier in the day, which and in the third quarter.

The pair inched up 0.02% to 6.6835. The yuan had held onto gains against the greenback as Wang Chunying, spokeswoman for China’s State Administration of Foreign Exchange (SAFE), told a news conference that the yuan has been more stable than expected.

Wang’s comments suggested that Chinese authorities are not too worried about the yuan’s recent rise and helped the yuan’s onshore trade to soar up to about half a percent shy of the 27-month peak it saw on Wednesday.

The pair edged down 0.15% to 1.3062. The pound saw losses on Thursday over the Brexit uncertainty, with investors monitoring the intensified talks between the U.K. and European Union, started on Thursday as a last-ditch effort to reach a deal.

The U.K. and Europe will release Purchasing Managers’ Index (PMI) figures due later in the day, with investors gauging the economic damage as the region battles a second wave of COVID-19 cases. The U.S. will also release its PMI figures later in the day.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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