Market Overview

27 August 2020

Euro is Stuck in High Altitude

The single European currency has optimistically endured  the market turbulence over recent weeks. The rally in the EUR/USD went almost to the 1.20 level with a recent correction to 1.1750-1.1850. The Euro is acting like a risky asset in contrary to the safe haven U.S. Dollar. Market sentiment is seen to be on a positive note as it is likely almost entirely ignoring the negative notions. The rise of the second pandemic wave in Europe is seen not to disrupt the European currency too much.

The surprising satisfaction of the U.S.-China phase one trade deal from both sides acts as a support for the Euro, if not to consider the actual implementation of phase one targets, which is lagging far behind the outlined plan. The world pandemic may excuse the lagging, but is it a real reason or are the phase one trade deal targets set sky-high and could not be achieved anyway this year? Is seems of no matter as parties are pleased so far.

The German IFO Institute business climate index rose in August to 92.6 points compared to 90.4 points a month before, which is also extending support to the Euro.

However, a path above the 1.20 level is hard to be followed by the single European currency despite  a negative for the Greenback. The U.S. Federal Reserve (Fed) is acting cautiously, and its sobriety from a further loosening of the monetary policy, while retaining close to zero interest rates for a long time perspective, and the overall oversold U.S. Dollar after several months of its declining are possibly holding the Euro from another rally. So, the ball is in the Fed’s court now. And a major kick off for the Greenback may come after Fed’s Chair Jerome Powell’s virtual speech at the Jackson Hole conference on Thursday evening.

A confirmation of Euro’s trampling may be found on the charts too with clear sideway movements in recent month. This morning the single European currency was within the 1.17-1.97 range. The Greenback and the Euro have been incapable of breaking through this range until now. A break through the upper ceiling of this range may drive the Euro to the next 1.22 resistance level. Though from a fundamental and technical point of view, the single European currency may extend its correction to the 1.600-1.680 area, which might seem logical after a long-lasting rally that started in April 2020.

 

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Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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