Euro Forecast – EUR/USD Forecast Bearish As Second Wave of Coronavirus Hits Europe

euro

TECHNICAL EURO OUTLOOK – BEARISH

  • Nations across Europe have started to report a resurgence in coronavirus cases after a short lull, even though this might be simply because of increased testing.
  • Incase confirmed, the European economy might not outperform the united states in a way that was expected previously and this might damage the EUR/USD, especially incase pessimism regarding the EU economy usually prompts traders to minimize their long positions.

EURO PRICE RISKS A SETBACK

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The 2nd wave of coronavirus pandemic seems to hit Europe, forcing traders to re-consider the narrative that the EU economy would suffer less damage from the pandemic than the economy of the united states. Although the most recent in numbers of infection will be simply because of increased testing, there are fears that this might prompt more damaging lockdown measures.

This is negative for the EUR/USD and might be increased incase more traders opt to respond by minimizing their long positions in the EUR/USD. As shown in the following chart, the professionals who have been long EUR/USD from March seem to be minimizing their long positions as Australian Dollar Eyes China 3rd Quarter GDP Data, Earnings Surging Coronavirus Cases.

If this trend continues, the EUR/USD might drop to the lows between 1.1611 and 1.1613 that had been recorded between 25th September and 28th September and possibly below 1.16, where the 100-DMA checks in.

Source: CFTC CoT Report

CONFIDENCE DATA

The full effect on the euro-area economy of coronavirus pandemic over the past 3 months will not be seen until 30th October, if preliminary 3rd quarter GDP data is released. However, in the week ahead, it’s important to consider the confidence indicators showing the degree to which the sentiment has been damaged by the possibility of a 2nd wave.

The Eurozone and German consumer confidence data and French business confidence numbers will be released on Thursday.

EUR/USD Chart

Source: Refinitiv

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