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

EURUSD Price Chart

Chart combined with TradingView

Fundamental Euro Forecast: Bearish

  • Countries opposite Europe are stating a resurgence in Covid-19 infections after a brief lull, nonetheless that could be due simply to increasing testing.
  • If confirmed, a European economy might not outperform a US in a approach formerly expected, and that could repairs EUR/USD, quite if melancholy about a EU economy prompts veteran traders to revoke their prolonged positions further.

Euro cost during risk of setback

A second call of a Covid-19 pestilence appears to be attack Europe, forcing investors to rethink a account that a European economy will humour reduction repairs from a pathogen than a US economy. While a latest arise in infection numbers could be due simply to increasing testing, a fear is that it will prompt serve deleterious lockdowns.

That is a transparent disastrous for EUR/USD and could be magnified if some-more investors confirm to respond by shortening serve their prolonged positions in a pair. As a draft subsequent shows, professionals have been prolonged EUR/USD given Mar though have been reducing their prolonged positions in new weeks.

EURUSD Chart

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

If that trend persists, EUR/USD could good drop to a lows during 1.1611 and 1.1613 available on Sep 25 and Sep 28, and maybe only subsequent there to 1.16 or 1.1596, where a 100-day relocating normal checks in.

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

EURUSD Price Chart

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

EUR Forecast
EUR Forecast

Confidence information on a agenda

The full impact on a Eurozone economy of a Covid-19 pestilence in a 3 months July-September will not be famous until Oct 30, when “flash” rough third-quarter GDP information are released. This entrance week, however, is an critical one for certainty indicators suggesting a border to that view has been shop-worn by a awaiting of a second wave.

German and Eurozone consumer certainty numbers, and French business certainty data, are all expelled Thursday. The subsequent day they will be followed by peep Oct purchasing managers’ indexes, and any signs of worse-than-expected debility could make a opinion for EUR/USD even some-more bearish.

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— Written by Martin Essex, Analyst

Feel giveaway to hit me on Twitter @MartinSEssex