EURO TO US DOLLAR FORECAST: EUR/USD PRICE ECLIPSES 200-DAY MOVING AVERAGE DRIVEN BY EU RECOVERY FUND HOPE
- EUR/USD outlook has enjoyed a positive boost owing to a €750 billion Euro recovery fund proposal aimed at offsetting
- The Euro is on pace for a 2% gain this week as spot EUR/USD surges past the 1.1000 price level and its 200-day moving average
- EUR price action could struggle against its safe-haven US Dollar peer as EU countries debate the coronavirus stimulus package amid escalating China tension
EUR/USD prices have been on a tear higher recently. Spot EUR/USD just extended its rally for the fourth-consecutive trading session and sent the major currency pair to its strongest reading in eight weeks. The proposed EU recovery fund, which would extend €500 billion in grants and €250 billion in loans, stands out as a primary driver of Euro gains.
| Change in | Longs | Shorts | OI |
| Daily | 11% | -21% | -3% |
| Weekly | 5% | -2% | 3% |
A marked rise in the German Bund to Italian BTP spread underscores this prospect of symbolic EU action and likely contributes to advancing EUR/USD price action. Moreover, Euro strength also seems exacerbated in part by broad US Dollar weakness as demand for safe-haven currencies fades and unwavering risk appetite crushes volatility.
EUR/USD PRICE CHART: DAILY TIME FRAME (DEC 2019 TO MAY 2020)
EUR/USD now trades comfortably above its 200-day moving average again after a 300-pip rally in spot prices since the potential EU stimulus package was first announced on May 18. Also, after eclipsing technical resistance posed by the 1.1000 price level, Euro bulls might attempt to make another push higher and possibly look toward the March 27 swing high as an upside objective.
On the other hand, EUR/USD prices are probing the upper Bollinger Band, which, statistically speaking, could facilitate a mean-reversion lower. Likewise, rising China tension threatens to rekindle US Dollar demand and spark a reversal in spot EUR/USD. A breakdown in negotiations over the €750 billion recovery fund proposal – a material possibility in light of opposition voiced by relatively more frugal European counties – could similarly cause EUR/USD price action to pivot sharply lower.
-- Written by Rich Dvorak, Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for real-time market insight
