EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(June 01 – June 05, 2020)
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US Dollar Fundamental Outlook: USD Tumbles As Risky Assets Continue The Recovery
The Dollar traded lower to end May on a weak note as investors’ sanguinity propelled the recovery in risky assets and currencies further higher. The broad Dollar Index is now back at levels from early February, where it traded before the coronavirus-driven sell-offs impacted the markets. With the massive bond-buying programs, the Fed and other major central banks effectively killed volatility in the Fx market and completely reversed the crisis’ impact on
exchange rates.
It ought to be a busy week for the greenback, or that’s what the calendar schedule suggests at least. The market’s attention will be on Friday’s releases where Non-Farm Payrolls is expected to show 8-10 million jobs were lost in May, and the unemployment rate is forecasted to have climbed above 20%.
In addition to the busy calendar, investors will be watching US-China relations, which have tensed up again over Hong Kong. More significant confrontations were avoided for now, allowing risk appetite to stay supported. Investors are also optimistic about a COVID-19 vaccine and a quick rebound in the economy. The Dollar would, therefore, likely extend the decline if this enthusiasm prevails.
Euro Fundamental Outlook: Watch Out For A Dovish ECB That May Kill The EUR Rally
The euro is staging a relief rally on the back of the proposed Corona recovery programs by France and Germany, and also the expanded version proposed by the European Commission. The programs are getting a lot of support from top EU figures, also including the ECB.
However, the proposals are still facing opposition from certain EU countries. While some form of agreement will likely be reached, the final size and shape of the recovery program will also be crucial for the impact on the economy and the euro currency.
Turning to this week, the ECB is expected to expand the Pandemic Emergency Purchase Programme at their meeting on Thursday. Higher volatility in EUR pairs around and after this event is likely since the forecasts vary notably, with the consensus expecting the ECB to add around €500 billion of purchases to the programme. Recent comments from President Lagarde indicate a strong dovish bias for the ECB meeting. Namely, Lagarde and other ECB officials
remarked that the recession is likely going to be worse than their initial forecasts predicted in March. The Governing Council will also release new forecasts at this meeting.
EURUSD Technical Outlook:
EURUSD made a notable push above the 1.10 resistance last week. The pair seems to be on the way toward the next pivotal resistance now, which is at 1.12.
The bullish candle on the weekly chart is a favorable sign for further upside price action. However, it is too soon to call a more durable bottom in EURUSD here until 1.12 is cleared. The next significant resistance above 1.12 is the 1.15 zone.
The nearest support is now at 1.10, in what is known as former resistance turning support. The crucial support for EURUSD, however, remains pinned at the 1.07 – 1.08 lows.
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