EURUSD Forecast and News


EUR/USD climbs above 1.1250 as investors eye coronavirus headlines

EUR/USD preserved its recovery momentum early Friday and rose above 1.1250 during the European trading hours. Markets are doubting the Fed's policy tightening prospects as the new coronavirus variant revives concerns over the economic recovery losing steam.

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Technical Overview

EUR/USD has rebounded sharply on the final trading day of the week amid a spike in broader market volatility owing to concerns about a new, potentially vaccine-resistant, Covid-19 variant in South Africa. The pair has rebounded to just below 1.1300 from early Friday Asia Pacific session lows just above 1.1200, a near 90 pip (roughly 0.8%) rally on the day. If the pair closes the week out at current levels, that would mark its best one-day performance since early May.


Fundamental Overview

Some traders were perplexed by the pair’s strong performance. Typically, the US dollar is seen as more of a safe-haven asset than is the euro, so why is the euro outperforming the dollar by such a significant degree on a day characterised by risk-off flows?

Some FX strategists said that the latest Covid-19 developments had encouraged market participants to take profit on short-euro positions, with the euro (before this Friday) heavily oversold. It is true that, until Thursday, EUR/USD’s Relative Strength Index score was 26.62, below the 30 level that technicians view as signifying oversold conditions.

But the story of euro outperformance versus the US dollar likely has more to do with an adjustment of central bank policy tightening expectations. In recent weeks, central banks have been a key driver of FX markets. Fed tightening expectations had been being brought forward amid strong US data, high inflation and hawkish Fed speak, benefitting the buck, while the ECB maintained a more dovish stance and the outlook for the Eurozone deteriorated amid rising Covid-19 infection rates.

If a nasty new Covid-19 variant does spread globally and damages the global economic recovery, this thus leaves the US dollar more vulnerable to a dovish repricing in Fed policy expectations than it does the euro. This seems to be the view of USD and EUR short-term interest rate markets on Friday.

The December 2022 three-month eurodollar future (a proxy for where markets expect the Fed funds rate to be next December) jumped 17 points to 99.10 on Friday. In other words, markets reduced their Fed tightening expectations for 2022 by 17bps. Meanwhile, the December 2022 three-month Euribor future was up a much more modest 3 points to 100.38, though this was it highest in over a month.

Given that the December 2022 eurodollar future was trading at 99.50 as recently as the start of October, there is plenty more room for upside if the Covid-19 situation in the US deteriorates in the coming months. This would present as an upside risk to EUR/USD.



SPECIAL WEEKLY FORECAST

Interested in weekly EURUSD forecast? Our experts make weekly updates forecasting the next possible moves of the euro-dollar pair. Here you can find the most recent forecast by our market experts:

EUR/USD: Central banks in denial about inflation and a new coronavirus variant shaking the FX board Premium

US inflation surged to its highest in three decades, Fed officials becoming concerned. A new coronavirus variant that may evade immune response spurred risk-aversion. EUR/USD is correcting oversold conditions, additional gains are still unclear.

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Editors' picks

EUR/USD climbs above 1.1250 as investors eye coronavirus headlines

EUR/USD preserved its recovery momentum early Friday and rose above 1.1250 during the European trading hours. Markets are doubting the Fed's policy tightening prospects as the new coronavirus variant revives concerns over the economic recovery losing steam.

EUR/USD News

GBP/USD rebounds toward mid-1.3300s on broad dollar weakness

GBP/USD reversed its direction after dipping below 1.3300 earlier in the day and started to push higher toward 1.3350. The greenback is facing heavy selling pressure amid the sharp decline witnessed in the 10-year US Treasury bond yield.

GBP/USD News

USD/JPY flirts with daily low, around 114.70-65 region

USD/JPY witnessed aggressive long-unwinding trade on Friday amid the risk-off impulse. The new COVID-19 variant spooks investors and triggers a sharp fall in the equity markets. Retreating US bond yields kept the USD bulls on the defensive and added to the selling bias.

USD/JPY News

Gold clings to strong gains above $1,800 as US T-bond yields plunge Premium

Gold staged a decisive rebound on Friday and reclaimed $1,800. The intense flight to safety is causing US Treasury bond yields to fall sharply and fueling XAU/USD's rally. Investors await news on vaccines' effectiveness against the new COVID variant.

Gold News

WTI battered by South Africa Covid-19 variant fears, drops to $74.00/barrel area

Crude oil markets have taken a battering on the final trading day of the week, with front-month WTI future prices trading around $74.00, a more near $4.00 or roughly 5.0% drop on the day. But WTI is well off earlier session lows around $72.75, where losses at the time stood at nearly 7.0% or over $5.0.

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EURUSD Yearly forecast

How could EURUSD move this year? Our experts make a EUR/USD update forecasting the possible moves of the euro-dollar pair during the whole year. Don't miss our 2021 EURUSD forecast!

EURUSD FORECAST 2021

In the EURUSD Forecast Price 2021, our dedicated contributors expect the bearish trend to slow down during the year. By the end of the year 2020, the average outlook for the pair was 1,2234. Read more details about the forecast.

From Jan 2020 to Dec 2020, the maximum level for the EURUSD (Euro US Dollar) was 1.2282 (on 17/12/20), and the minimum, 1.0645 (on 19/03/20).

MOST INFLUENTIAL POLITICAL EVENTS IN 2021 FOR EURUSD

A pandemic disrupted financial markets and the global economy in 2020, and the greenback is the overall loser. The US management of the pandemic resulted in 18 million people infected and roughly 325,000 deaths. It also cost Trump's government, who lost the re-election to Democrat rival Joe Biden. Social distancing, face-masks and remote working are part of a new normal that will likely continue through 2021. Central banks' measures will be key for EUR/USD moves this next year.


Influential Institutions & People for the EUR/USD

The Euro US Dollar can be seriously affected by news or the decisions taken by two main central banks:

The European Central Bank (ECB)

The European Central Bank (ECB) is the central bank empowered to manage monetary policy for the Eurozone and maintain price stability, so that the euro’s purchasing power is not eroded by inflation. The ECB aims to ensure that the year-on-year increase in consumer prices is less than, but close to 2% over the medium term. Another of its tasks is one of controlling the money supply. The European Central Bank’s work is organized via the following decision-making bodies: the Executive Board, the Governing Council and the General Council. Christine Lagarde is the President of this organism. 

The Federal Reserve Bank (Fed)

On the other hand we found The Federal Reserve System (Fed) wich is the central banking system of the United States. Fed has two main targets: to keep unemployment rate to their lowest possible levels and inflation around 2%. The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors, partially presidentially appointed Federal Open Market Committee (FOMC). The FOMC organizes 8 meetings in a year and reviews economic and financial conditions. Also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth.


Christine Lagarde

Christine Lagarde was born in 1956 in Paris, France. Graduated from Paris West University Nanterre La Défense and became President of the European Central Bank in November 1st 2019. Prior to that, she served as Chairman and Managing Director of the International Monetary Fund between 2011 and 2019. Lagarde previously held various senior ministerial posts in the Government of France: she was Minister of the Economy, Finance and Industry (2007–2011), Minister of Agriculture and Fishing (2007) and Minister of Commerce (2005–2007).

Jerome Powell

Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31, 2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.

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About EURUSD

The EURUSD (or Euro Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. This group also includes the following currency pairs: GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The popularity is due to the fact that it gathers two main economies: the European and American (from United States of America) ones. This is a widely traded currency pair where the Euro is the base currency and the US Dollar is the counter currency. Since the EURUSD pair consists of more than half of all the trading volume worldwide in the Forex Market, it is almost impossible for a gap to appear, let alone a consequent breakaway gap in the opposite direction.

Normally, it is very quiet during the Asian session because economic data that affects the fundamentals of those currencies is released in either the European or U.S. session. Once traders in Europe get to their desks a flurry of activity hits the tape as they start filling customer orders and jockey for positions. At noon activity slows down as traders step out for lunch and then picks back up again as the U.S. comes online. If there is important U.S. data we can expect quiet markets just ahead of the number. U.S. economic news have the ability to either reinforce an existing trend or reverse it depending on by how much it missed or beat expectations with the EURUSD news. By 5:00 GMT liquidity leaves the market once again as European traders close out positions and head home.

Related pairs

GBP/USD

The GBP/USD (or Pound Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs worldwide. This group also includes the following currency pairs: EUR/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The pair is also called 'The Cable', reffering to the first Transatlantic cable that was crossing the Atlantic Ocean in order to connect Great Britain with the United States of America. This term was originated in the mid-19th century and it makes GBP/USD one of the oldest currency pairs in the world.

The popularity of the Pound Dollar is due to the fact that represents two strong economies: British and American (from United States of America). The Cable is a widely observed and traded currency pair where the Pound is the base currency and the US Dollar is the counter currency. After the result of the Brexit referendum, where the majority of the British voted to abandon the European Union, GBP/USD has been suffering some turbulence in the Forex market as a consequence of the associated risks of leaving the single market.

USD/JPY

The USD/JPY (or US Dollar Japanese Yen) currency pair is one of the 'Majors', the most important pairs in the world. Japanese Yen has a low interest rate, normally used in carry trades, that's why is one of the most trades currencies worldwide. In the USD/JPY the US Dollar is the base currency and the Japanese Yen is the counter currency. The pair represents American (from United States of America) and Japanese economies.

Trading the USD/JPY currency pair is also known as trading the "ninja" or the "gopher", although this last name is more frequently used when reffered to the GBP/JPY currency pair. The US Dollar Japanese Yen usually has a positive correlation with the following two pairs: USD/CHF and USD/CAD. The nature of this correlation is dued to the fact that both currency pairs also use the US Dollar as the base currency, such as USD/JPY. The value of the pair tends to be affected when the two main central banks of each country, the Bank of Japan (BoJ) and the Federal Reserve Bank (Fed), face serious interest rate differential.