Euro Forecast: Outlook for EUR/USD Still Positive, Focus on Recovery Fund
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Fundamental Euro Forecast: Bullish
- EUR/USD continues to advance within an upward-sloping channel on the daily chart, suggesting further gains to come.
- From a fundamental perspective, much will depend on progress at Friday’s video conference of members of the European Council to discuss the issue of a recovery fund to respond to the coronavirus pandemic, and a new long-term EU budget.
Euro price well placed for further gains
European Union heads of state and government are due to hold a video conference this coming Friday to discuss the controversial issue of a recovery fund to respond to the economic damage to the region caused by the Covid-19 pandemic, and that European Council meeting will likely determine the long-term outlook for the Euro.
A new long-term EU budget – known officially as the multiannual financial framework for 2021-2027 – will be on the agenda too but for Euro traders the more important point will be whether some kind of agreement can be reached ahead of a summit at a later date. If so, EUR/USD should benefit, along with the EUR crosses.
Ahead of that conference, the likely direction of EUR/USD will depend on both overall market sentiment and any hints as to whether the €750 billion package of grants and loans designed by Germany and France can win the support of the so-called “frugal four”: Austria, Denmark, the Netherlands and Sweden.
EUR/USD Price Chart, Daily Timeframe (February 12 – June 11, 2020)
Chart by IG (You can click on it for a larger image)
As the chart above shows, EUR/USD has been rising within an upward-sloping chart channel since May 25 so the bias is for further gains, despite an overbought reading from the relative strength index, although any signs of a stalemate on the recovery fund would likely knock the pair back.
Week ahead: ZEW
Also on the agenda this coming week is Tuesday’s ZEW economic sentiment index for Germany in June. This survey-based index is calculated from the views of analysts and investors but is not as well respected as the better-known Ifo index and therefore should not be market-moving, particularly as the hit to the Eurozone economy from the coronavirus pandemic has already been largely priced in.
--- Written by Martin Essex, Analyst and Editor
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