EURUSD headed to 1.2000 before the ECB meeting next week?

October 23, 2020 12:30

Source: Economic Events October 23, 2020 - Admiral Markets' Forex Calendar

With upcoming selling pressure in the US-Dollar, EURUSD is pushing significantly back above 1.1800, currently eyeing the region around 1.1900.

There is a reason we have pointed out the selling pressure in the US-Dollar and not Euro strength:

  • We are very sceptical, in terms of the European currency
  • We see intensifying signs of very dovish rhetoric from the ECB next week on Thursday
  • The ECB is likely to significantly weaken the Euro

These signs can, for example, be seen when looking at the Invesco Euro Currency Shares ETF which saw its 2nd biggest capital weekly outflow last week amongst all Eurozone-related ETF's, most likely in anticipation of a dovish ECB next week.

But with further US-Dollar weakness to be expected once Democrats and Republicans finally reach a deal on an economic relief package, financed with freshly printed US-Dollar from the US central bank FED, the question seems to be: how dovish can the ECB be to counter the ongoing dovishness of the FED and USD weakness?

We feel that chances are high that we'll see some heavier volatility in the days to come, especially into next week's weekly close (Thursday and Friday), but that traders should remain careful in regards to short-term dips in the EURUSD.

The fact that the currency pair hasn't seen another run down to the 1.1600 area and lower indicates substantial buying of the Euro/selling of the USD taking place, leaving any short-term dip to be short-lived, with the currency pair likely to see an aggressive attempt to capture 1.2000 into the monthly close, especially if a break above 1.1900 is seen:

Source: Admiral Markets MT5 with MT5SE Add-on EURUSD Daily chart (between July 17, 2019, to October 22, 2020). Accessed: October 22, 2020, at 10:00 PM GMT. Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the EURUSD fell by 10.2%, in 2016, it fell by 3.2%, in 2017, it increased by 13.92%, in 2018, it fell by 4.4%, and in 2019, it fell by 2.2%, meaning that in five years, it was down by 7.3%.

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