Source: Economic Events July 31, 2020 - Admiral Markets' Forex Calendar
In our last technical piece for the EUR/USD we wrote:
[…]That said, the Euro should continue to outperform the US dollar and with US yields about to break lower, the path up to 1.1700/1800 in the days to come seems levelled.[…]
and as the chart below illustrates, the currency pair did indeed make its way straight up towards this region.
And after the Fed rate decision and press conference on Wednesday, it seems likely that the US dollar will continue to underperform, particularly against the Euro. The Euro should see further strength after EU leaders reached a deal in regards to a post-pandemic recovery package to support the EU economy, in addition to nearly unlimited monetary support from the ECB.
Besides the fact that the Fed held interest rates steady, as expected, its statement wrote that:
"Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year",
expressing a commitment to maintain its QE program, and the array of lending and liquidity programs associated with the virus response which were extended to, at least, the end of 2020, as announced before the Fed meeting on Tuesday.
A translation: expect the Fed to continue to weaken the US dollar and aim to put further pressure on US yields, with 10-year US yields to be expected to go for a run as low as 0%.
Disappointing US economic projections (such as today's personal spending data at 1230pm GMT) could accelerate this development, even though, from a technical perspective, the EUR/USD seems quite extended on the upside.
While we consider the chances of a consolidation between 1.1600 and 1.1800 to be elevated, we'd prefer a short-term correction towards 1.1400/30 since this would deliver a more attractive risk-reward ratio for a trading setup.
Technically, the mode stays bullish on a daily time-frame as long as we trade above 1.1150/1200:
Source: Admiral Markets MT5 with MT5-SE Add-on EUR/USD Daily chart (between May 31, 2019, to July 30, 2020). Accessed: July 30, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2015, the value of the EUR/USD fell by 10.2%, in 2016, it fell by 3.2%, in 2017, it increased by 13.92%, 2018, it fell by 4.4%, 2019, it fell by 2.2%, meaning that after five years, it was down by 7.3%.
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