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EURUSD significantly above 1.1600, despite rising US yields – 1,2000 soon?

October 09, 2020 11:30

EURUSD significantly above 1.1600, despite rising US yields – 1,2000 soon?

Economic Events October 09, 2020Source: Economic Events October 09, 2020 - Admiral Markets' Forex Calendar

Into the weekly close, the economic calendar is quite thin, even though recent political developments are delivering enough fuel for potential volatility in FX markets and, thus, EURUSD.

Tuesday evening US President Donald Trump tweeted that he told his administration's negotiators around US Treasury Mnuchin to end their current coronavirus stimulus talks with Democrats until after the US presidential election on the 3rd of November.

Here is what happened, as a result:

  • The US-Dollar saw an initial sharp push higher
  • EURUSD dropped, but the currency pair failed to gain further bearish momentum and stabilized around the short-term important support of 1.1680/1700
  • In less than 24 hours, EURUSD traded slightly below 1.1800 again

This underlines that US-Dollar long engagements should be taken, if at all, very cautiously.

That may be especially true since the US-Dollar hasn't shown any signs of further strength or an acceleration of its recent short squeeze with 10-year US yields pushing to the highest levels since June.

In fact, we consider the implicit USD weakness over recent days as proof of our overall bullish EURUSD take, expecting it to trade around 1.2500 and even higher 6 to 12 months from now.

While we still foresee a stint to below 1.1600 and the currency pair testing the region around a potential mid-term long-trigger around 1.1450/1500, the US-Dollar could see heavier selling pressure, especially if the FED issues a Corona relief package for further monetary stimulus by significantly ballooning its balance sheet beyond the 7 trillion USD, thus, levelling the path back to 1.2000 in the days to come:

Admiral Markets MT5 with MT5SE Add-on EURUSD Daily chartSource: Admiral Markets MT5 with MT5SE Add-on EURUSD Daily chart (between July 03, 2019, to October 08, 2020). Accessed: October 08, 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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