After the Fed: the EUR/USD to attack 1.2000 due to further USD weakness?

Julij 31, 2020 13:00

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%.

Discover the world's #1 multi-asset platform

Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!

Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
  4. To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
  6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
  7. Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  8. The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks


Admirals Vse rešitve na enem mestu za porabo, investiranje in upravljanje denarja

Več kot samo broker, Admirals je finančno središče, ki nudi široko paleto finančnih produktov in storitev. Omogočamo vam upravljanja vaših osebnih financ preko enkratne združene rešitve, ki omogoča investiranje, porabo in upravljanje denarja.