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Euro forecast for 2020: The EUR/USD outlook has strengthened. And now?

Euro forecast for 2020: The EUR/USD outlook has strengthened. And now?

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The economy of the eurozone seems to have reached a turning pointMacroeconomic references have begun to show signs of stabilization and a decrease in the pace of deceleration

For example, PMI figures have shown green shoots and a certain degree of improvement, while the confidence of both investors and consumers has rebounded. Although it is too early to confirm with certainty, everything indicates that the worst has already happened and that the economic recovery would gain strength in 2020.

This event, in theory, would reinforce capital flows to European markets and, consequently, towards the euro in the new year, acting as a bullish catalyst for the community currency.

The European Central Bank has echoed these developments, noting that the balance of risks has decreased and that it is less pronounced. 

This message suggests that the entity led by Christine Lagarde would avoid deploying new stimuli and remain in standby mode for an extended period of time while analyzing the evolution of inflation and GDP. Needless to say, a neutral monetary policy would have a positive effect in the euro capable of fostering a sustained appreciation in the exchange positions.

Another important element to consider is the United States presidential elections. As we approach the election date (November 2020), the US dollar would lag behind because of political uncertainty

This would undoubtedly favor the exchange rate of the EUR/USD, creating a more favorable environment for its strengthening. For these reasons, it would not be surprising if the world’s most liquid pair consolidates in the range of 1,100-1,1600 over the next six months, a revaluation of more than 3% from its current levels.

EUR / USD TECHNICAL ANALYSIS

From a technical point of view, any trader of the EUR/USD must take into account the resistance in the region of 1,111/1,100, an area defined by the confluence of the October/November/December highs, of the 200-day moving average and of a long-term descending guideline.

If the breaks price hike this roof, this occurrence would issue a bullish signal for the pair, strengthening its prospects for progress at the start of 2020.

To confirm the validity of the break, however, it is necessary that the EUR/USD quote sustained over the SMA-200 for more than a week, which has not been done since May 2018. If the break is validated, the baseline scenario represents a rise to 1.1400/1.1450, an area where the March and June highs are aligned of 2019.

Alternatively, if the EUR/USD falters and fails to overwhelm the resistance at 1.1160/1.1200 in the short term, it would be a matter of time for sellers to regain control of the market. In this case, it is possible to observe a fall to support at 1.1000, a terrain defined by the November lows and the 61.8% Fibonacci retracement of the October/December range.

TECHNICAL GRAPH OF EUR/USD

EURUSD technical chart

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