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US dollar price forecast 30 June 2021 | EURUSD Fundamental analysis


Some investors frequently change their views, others stick to old ideas. The Fed divided investors. How will it affect the EURUSD? Let us discuss the Forex outlook and make up a trading plan.

Weekly US dollar fundamental forecast

The EURUSD bears do not seem very confident. The euro-dollar rate hits new local lows and goes up again. The dollar buyers are inspired by the expectations of the positive US employment data, which will increase the chance of the federal funds rate hike in 2022. But how can one buy such a safe-haven asset like a greenback when the S&P 500 hits its 33rd record high in less than 6 months? In 2020, it took the stock index a full year to reach that figure.

Before the FOMC June meeting, the world of financial markets stood on three elephants: sustained economic growth, the temporary nature of high inflation, and ultra-easy monetary policies of the world’s central banks. The change in the views of Jerome Powell and his colleagues suggested that at least two of the key factors may not work any longer. As it always happens in such cases, some investors welcomed the idea of ​​a faster normalization of the Fed’s monetary policy than expected and started selling the EURUSD. Others, on the contrary, continue holding on to old positions, arguing that the Fed has invested too much of its reputation in monetary stimulus to abandon it easily.

The differences in views are clear from the forecasts of large banks. For example, BofA Merrill Lynch does not understand how inflation can be temporary if the underlying factors are long-lasting and predicts a PCE of 2%-4% over the next 4 years. On the other hand, Goldman Sachs, the euro fan, believes that the US economy is in the midst of a one-time inflationary outbreak. If so, then one should not expect an increase in the federal funds rate earlier than 2023, which will encourage the EURUSD bulls.

While the US deals with inflation, the ECB seems to have found a way to weaken the euro. The European Central Bank clearly does not want to raise the interest rate due to the change in the Fed’s tone. The ECB officials emphasize the differences in the economic recovery of the US and the euro area. Christine Lagarde’s words that the euro area is clearly in a different situation than the United States, at the press conference following the June meeting of the Governing Council, discouraged the EURUSD bulls.

Dynamics of inflation in USA and euro area


Source: Bloomberg

In my opinion, the divergence in the monetary policy suggests the euro should continue depreciating versus the US dollar. The US housing prices hit all-time highs. The housing market is obviously overheated, and the Fed discusses the possibility of the so-called two-speed taper, which means scaling back the mortgage-bond purchases earlier or more quickly than the Treasury debt purchases. However, the ECB’s wait-and-see approach sets back the EURUSD buyers.

Weekly EURUSD trading plan

The euro should not crash amid the S&P 500 rally, resulted from the positive data on consumer confidence and the expectations of new stimulus packages proposed by Joe Biden. Therefore, the EURUSD could be consolidating in the range of 1.188-1.193 ahead of the US jobs report. If the EURUSD is in the consolidation range till Friday, there will be a good chance to trade the range breakout.


Price chart of EURUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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