Euro Outlook: EUR/USD Forecast Still Bearish, But Rebound is Due



  • Largely faced with the strong US Dollar on the haven-linked demand and more fears of the 2nd wave of COVID-19 pandemic sweeping across Europe, the EUR/USD outlook remains bearish even after the immediate losses.
  • The bounce will most likely come with the profit takers realizing their bottom fishers and gains move in, but significant price action is not possible.


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The EURO has very little working for it today amidst fears of the 2nd wave of the coronavirus pandemic in Europe and more concerns regarding the nascent economic recovery in Europe. In addition to the downtrend pressure on the pair, the DXY index continues to benefit from buyers looking for safer havens.

Having said that, no trend will last forever and the rebound will most likely come after the fully-fledged recovery is still away.

As shown on the following chart, a 20-day Moving Average seems likely to close under the 50-day Simple Moving Average and the bearish crossover might confirm the downtrend momentum in the EUR/USD. This is short-term optimism, although from the 2 weeks RSI, highlighted on the chart, that is currently below the 30 levels showing that the EUR/USD is currently overbought.



With regards to the European Central Bank, Philip Lane, the Chief Economist made it clear last week that they have inflation in sight. The baseline case in the staff projections factors in the medical solution is found in the next few years. This will support the recovery of the service industry and add upward pressure on inflation in the service sector.

The September inflation data that is due in the week ahead will be substantial, with data due on Tuesday and Wednesday from Germany and France and the Eurozone. In Germany, the year/year inflation will most likely remain at zero, whereas the Eurozone in the HICP measure might remain at -0.2% making sure that the ECB policy stays accommodative.

Keep in mind that, although Lane’s remarks on market pricing show that the ECB’s -0.5% deposit rate can be very close to the level to the end of last year.

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