US economic data in the last couple of weeks were not as bad as feared. US Institute for Supply Management (ISM) report showed its manufacturing index rose to 43.1 in May from an 11-year low of 41.5 in April . And the ISM’s non-manufacturing PMI came in at 45.4 in May, above the consensus forecast of 44.7. Readings above 50.0 indicate sector expansion, below indicate contraction. Furthermore, data from Automatic Data Processing showed private sector employers cut 2.76 million jobs in May, following a decrease of 20.2 million in April. Analysts had expected a drop of 9 million. The better than expected economic data undoubtedly were result of stimulus measures which were expanded in the last couple of months. Thus, a supplementary stimulus package, named Phase 3.5, was signed into law on April 24, 2020 appropriating $484 billion, mostly to replenish the Paycheck Protection Program (PPP) and expanded Economic Injury Disaster Loan (EIDL), and contains additional funding for hospitals and COVID-19 testing. The fiscal and monetary stimulus programs by the Federal Reserve buoyed investors’ confidence, propping the equity market. At the same time the more closely watched Labor Department employment report will be released Friday, and official data painting a picture worse than the one ADP reported is an immediate downside risk for SP500.
– Gold and Silver moved lower early on June 2nd and 3rd. Our research team believes this is a “Washout Low” price rotation following a technical pattern that will prompt a much higher rally in precious metals. This type of washout price rotation is fairly common before very big moves after Pennant/Flag formations or just after reaching major price trigger levels.
With Gold, a sideways Pennant/Flag formation has been setting up near our GREEN Fibonacci Price Amplitude Resistance Arc. We believe the downward price rotation recently is a perfect setup for skilled technical traders to take advantage of lower entry price levels. The GREEN Fibonacci Price Amplitude Arc will very likely be breached over the next 5 to 10 trading days and the price of Gold should rally well above $1850 in the process. We believe this Washout Rotation is a process of running through the Long Stops just below recent price activity that will end with a defined upside price rally over the next 2 to 5+ weeks.
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Silver has set up a completely different type of price pattern – a true Double-Top pattern. The downward price rotation recently in Silver is indicative of a weaker reaction to this massive resistance pattern and Double-Top. The likelihood that Silver will find support above $17 and mount a further upside price rally over the next 2 to 5+ weeks is still very strong. After the deep downward price collapse in Silver took place, just like what happened in 2009 and 2010, the upside potential for Silver is still massive – likely targeting $65 per ounce of higher.
This current Gold to Silver Ratio Monthly chart highlights the recent collapse in the ratio level as Silver rallied from near $12 towards current levels near $18. A similar spike in the Gold to Silver Ratio took place in 2008-09 – just before the broader market collapse in the US and Global markets took place. This happens as the initial reaction to risk in the global markets pushes Gold prices a bit higher while Silver, the often overlooked store of value, typically declines in value.
Once the price of Silver starts to rally, pushing the Gold to Silver ratio below 60 typically, both Gold and Silver start to align in price and begin to rally together. The current level of the Gold to Silver ratio is 94.9. This suggests that both Gold and Silver have quite a way to go in terms of reaching the “alignment phase”. Our researchers believe Gold will rally above $2100 to $2400 and Silver will rally above $40 to $50 before the two metals align and begin to rally together in almost equal strength.
Concluding Thoughts:
Pay attention to what happens to precious metals over the next 10 to 15+ days. If our research is correct, both Gold and Silver will rally higher by about 7.5% to 14% – setting up new price highs for both metals. When the washout pattern completes, usually a fairly aggressive price trend begins where new price highs are established fairly quickly. Get ready, this should be a really nice upside price swing in precious metals over the next 6+ months or longer.
The next few years are going to be full of incredible opportunities for skilled traders and investors. Huge price swings, incredible revaluation events, and, eventually, an incredible upside rally will start again.
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EURUSD is trading at 1.1217; the instrument is moving above Ichimoku Cloud, thus indicating an ascending tendency. The markets could indicate that the price may test the cloud’s upside border at 1.1185 and then resume moving upwards to reach 1.1350. Another signal in favor of further uptrend will be a rebound from the rising channel’s downside border. However, the bullish scenario may be canceled if the price breaks the cloud’s downside border and fixes below 1.1130. In this case, the pair may continue falling towards 1.1045.
XAUUSD, “Gold vs US Dollar”
XAUUSD is trading at 1702.00; the instrument is moving below Ichimoku Cloud, thus indicating a descending tendency. The markets could indicate that the price may test Tenkan-Sen and Kijun-Sen at 1710.00 and then resume moving downwards to reach 1670.00. Another signal in favor of further downtrend will be a rebound from the descending channel’s upside border. However, the bearish scenario may no longer be valid if the price breaks the cloud’s upside border and fixes above 1725.00. In this case, the pair may continue growing towards 1755.00.
BTCUSD, “Bitcoin vs US Dollar”
BTCUSD is trading at 9625.00; the instrument is moving inside Ichimoku Cloud, thus indicating a sideways tendency. The markets could indicate that the price may test the cloud’s upside border at 9715.00 and then resume moving downwards to reach 8805.00. Another signal in favor of further downtrend will be a rebound from the rising channel’s downside border. However, the bearish scenario may no longer be valid if the price breaks the cloud’s upside border and fixes above 9965.00. In this case, the pair may continue growing towards 10455.00. To confirm further decline, the asset must break the support level and fix below 9215.00, thus completing a Head & Shoulders reversal pattern.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
As we can see in the H4 chart, the descending tendency continues. By now, USDCAD has formed a Hammer pattern not far from the support level. However, the price is not currently expected to reverse. Most likely, in the nearest future, the pair may correct for a while and then continue falling towards the support area at 1.3460.
AUDUSD, “Australian Dollar vs US Dollar”
As we can see in the H4 chart, after testing another resistance level, AUDUSD is still trading upwards. By now, it has formed a Shooting Star pattern. At the moment, the price is expected to reverse and correct towards 0.6802. In the future, the pair is expected to resume the rising tendency. in this case, the upside target may be at 0.7070.
USDCHF, “US Dollar vs Swiss Franc”
As we can see in the H4 chart, USDCHF has formed several reversal patterns, such as Engulfing, while trading not far from the support area. At the moment, the pair is expected to return to 0.9587b and rebound from it. In this case, the upside target may be at 0.9685.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
The US dollar has continued to decline against a basket of currency majors despite optimistic economic data. The dollar index (#DX) has updated local lows and closed in the negative zone (-0.41%). Thus, the number of people employed in the nonfarm sector decreased by 2,760K, while experts expected a larger reduction by 9,000K. ISM non-manufacturing PMI counted to 45.4 in May instead of 44.0. The conflict between the US and China is still in the spotlight. America has suspended China’s flights to the United States since June 16 after Beijing refused to allow United Airlines and Delta Air Lines to resume flights to China from June.
Investors have taken a wait-and-see attitude before today’s ECB meeting. It is expected that the regulator will keep the key marks of monetary policy at the same level. We recommend paying attention to the comments by representatives of the Central Bank. Yesterday, the Bank of Canada left the key interest rate unchanged at 0.25%.
The “black gold” prices have been declining. At the moment, futures for the WTI crude oil are testing the $36.55 mark per barrel.
Market indicators
Yesterday, there was the bullish sentiment in the US stock market: #SPY (+1.33%), #DIA (+2.06%), #QQQ (+0.45%).
The 10-year US government bonds yield has been growing. At the moment, the indicator is at the level of 0.75-0.76%.
The news feed on 2020.06.04:
– UK construction PMI at 11:30 (GMT+3:00);
– ECB interest rate decision at 14:45 (GMT+3:00);
– Initial jobless claims in the US at 15:30 (GMT+3:00).
Yesterday, the single currency continued its growth against the greenback. EUR/USD quotes have updated local highs again. The trading instrument is currently consolidating. The key range is 1.1185-1.1250. Investors have taken a wait-and-see attitude before today’s ECB meeting. It is expected that the regulator will keep the key marks of monetary policy at the same level. We recommend paying attention to the comments by representatives of the Central Bank. Financial market participants will also assess important economic releases from the US. Positions should be opened from key levels.
The Economic News Feed for 2020.06.04:
– ECB interest rate decision at 14:45 (GMT+3:00);
– Initial jobless claims in the US at 15:30 (GMT+3:00).
Indicators do not give accurate signals: the price is testing 50 MA.
The MACD histogram is in the positive zone, but below the signal line, which gives a weak signal to buy EUR/USD.
Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which indicates the bullish sentiment.
Trading recommendations
Support levels: 1.1185, 1.1155, 1.1100
Resistance levels: 1.1250, 1.1300
If the price fixes above the level of 1.1250, further growth of EUR/USD quotes is expected. The movement is tending to 1.1300-1.1320.
An alternative could be a decrease in the EUR/USD currency pair to 1.1150-1.1100.
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.25501
Open: 1.25710
% chg. over the last day: +0.19
Day’s range: 1.25245 – 1.25806
52 wk range: 1.1466 – 1.3516
GBP/USD quotes have become stable. Financial market participants have started partially fixing positions on the British pound after a prolonged rally. In the near future, a technical correction of the trading instrument is possible. At the moment, the local support and resistance levels are 1.2525 and 1.2575, respectively. We expect economic reports from the UK and the US. We recommend opening positions from key levels.
At 11:30 (GMT+3:00), UK construction PMI will be published.
Indicators do not give accurate signals: the price has crossed 50 MA.
The MACD histogram has moved into the negative zone, which indicates a possible correction of the GBP/USD currency pair.
Stochastic Oscillator is in the neutral zone, the %K line has crossed the %D line. There are no signals at the moment.
Trading recommendations
Support levels: 1.2525, 1.2480, 1.2425
Resistance levels: 1.2575, 1.2615
If the price fixes below 1.2525, GBP/USD quotes are expected to correct. The movement is tending to 1.2480-1.2440.
An alternative could be the growth of the GBP/USD currency pair to 1.2610-1.2650.
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.35171
Open: 1.34964
% chg. over the last day: -0.17
Day’s range: 1.34901 – 1.35293
52 wk range: 1.2949 – 1.4668
The USD/CAD currency pair continues to consolidate in the range of 1.3480-1.3540. In the near future, the technical correction of the trading instrument after a significant drop over the past two weeks is not ruled out. Financial market participants assess the Bank of Canada meeting. The regulator has kept the key interest rate at the same level of 0.25%. We recommend paying attention to the dynamics of “black gold” prices. Positions should be opened from key levels.
The news feed on Canada’s economy is calm enough.
Indicators do not give accurate signals: the price has crossed 50 MA.
The MACD histogram is near the 0 mark.
Stochastic Oscillator is in the neutral zone, the %K line has crossed the %D line. There are no signals at the moment.
Trading recommendations
Support levels: 1.3480, 1.3450, 1.3400
Resistance levels: 1.3540, 1.3585, 1.3675
If the price fixes below 1.3480, a further drop in USD/CAD quotes is expected. The movement is tending to the round level of 1.3400.
An alternative could be the growth of the USD/CAD currency pair to 1.3600-1.3640.
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 108.671
Open: 108.869
% chg. over the last day: +0.21
Day’s range: 108.802 – 109.147
52 wk range: 101.19 – 112.41
The bullish sentiment prevails on the USD/JPY currency pair. The trading instrument has set new local highs. At the moment, USD/JPY quotes are testing the resistance level of 109.15. The 108.80 mark is already a “mirror” support. We do not exclude the further growth of the USD/JPY currency pair. We recommend paying attention to the dynamics of US government bonds yield. Positions should be opened from key levels.
The news feed on Japan’s economy is calm.
Indicators signal the power of buyers: the price has fixed above 50 MA and 100 MA.
The MACD histogram is in the positive zone, indicating the bullish sentiment.
Stochastic Oscillator is in the neutral zone, the %K line has crossed the %D line. There are no signals at the moment.
Trading recommendations
Support levels: 108.80, 108.50, 108.30
Resistance levels: 109.15, 109.50
If the price fixes above 109.15, further growth of USD/JPY quotes is expected. The movement is tending to 109.50-109.70.
An alternative could be a decrease in the USD/JPY currency pair to 108.60-108.30.
In six months’ time the world’s gaze will be trained on what is gearing up to be a contentious and hotly contested presidential election in the US. Irrespective of who emerges victorious between the incumbent President Donald Trump and the Democratic nominee Joe Biden South Africa needs to start thinking about what it stands to lose – or gain – from the new administration’s stance.
This is especially so in the area of economic relations. Since 1994, trade and investment ties between the US and South Africa have evolved against the backdrop of a complicated political and diplomatic setting. This has ranged from:
US disagreements with the Mandela government over its links with Cuba, Libya and the Palestine;
to the huge promise of the binational commission chaired by Al Gore and Thabo Mbeki;
to the bitter rancour over the Mbeki government’s HIV/Aids policies;
to the deadlock over government-sponsored land invasions in Zimbabwe; and
to the rifts over United Nations resolutions against Israel.
In 2003, the two countries failed to conclude a trade agreement amid mutual recriminations.
There have been successes along the way. These include America’s support of South Africa’s breakthrough in preventing bloodshed in Burundi and Pretoria’s leading role in the establishment of the African Union. But these have been outweighed by the low points.
Image by TeeFarm from Pixabay
Economic cooperation is the linchpin of the bilateral relationship. South Africa is America’s largest trade and investment partner in Africa. Over 600 American firms operate in South Africa. In 2017, US direct investment to South Africa was $7.3 billion, while the latter’s outward investment to the US amounted to $4.1 billion.
Under the African Growth and Opportunity Act (Agoa), trade between the two countries has thrived. Introduced by the Clinton administration in 2000, it allows African countries to export duty-free to the US market, provided these countries meet certain governance criteria. In 2018, total two-way trade was $18.9 billion, with South Africa recording a trade surplus of $2.1 billion.
But these fair winds might not blow forever. In light of the global shifts since the inception of Agoa two decades ago, US policy towards South Africa might in future be less generous and accommodating. South Africa would do well to make wise use of the remaining years of Agoa, which expires in 2025, to diversify its export markets and retool its economy.
Tetchy trade links
Agoa has been a boon for South African exports. Before its implementation, South African exports to the US consisted mainly of minerals and metals. Under Agoa exports have become diversified, including platinum, aluminium, steel, vehicles, wine and beer, fresh and processed fruit and vegetables, and essential oils.
Despite this progress, trade links have remained tetchy. The fractious relationship came under scrutiny when then Trade and Industry Minister Rob Davies met with his American counterpart, Michael Froman, in Paris in 2015 to seek a solution to a dispute that represented a litmus test in the changing trade dynamics between the two countries.
Dubbed the “chicken wars” the dispute centred on a demand by American chicken producers for their government to withdraw South Africa’s participation in Agoa. The call had been in response to the imposition by Pretoria of anti-dumping measures on US imports of chicken portions. Such measures are allowed under World Trade Organisation rules and are designed to protect domestic industries from unfairly priced imports.
Despite vociferous lobbying by chicken farmers against South Africa’s inclusion in a renewed Agoa agreement, the US senate approved a bill extending Agoa for 10 years, with South Africa included. In return, South Africa agreed to allow 65 000 tonnes of poultry imports from the US. Excluding South Africa from the new Agoa dispensation could have harmed the country’s trade.
Washington’s belligerent stance
Yet America’s trade policy towards South Africa is changing. This is underscored by the fact that although the US included South Africa in the revised Agoa it did so with stringent conditions. These included a stipulation that South Africa’s trade and investment policies would be subject to a review within 30 days of Agoa’s implementation. If the review found that the South African market was not sufficiently open to US products, the US could limit South Africa’s Agoa benefits or suspend its participation in the scheme. Significantly, the revised Agoa did not provide for increased access for South African products to the US market.
Washington’s increasingly belligerent stance had also been reflected in the array of demands it had made in its trade talks with Pretoria. Besides the row over chicken exports, the US pushed strongly for the withdrawal of the Private Security Industry Regulation Amendment Bill. The bill required foreign-owned security companies to sell at least 51% of their domestic businesses to South Africans.
The change in America’s trade posture towards South Africa is a consequence of global shifts as well as factors specific to South Africa. Agoa came into existence during globalisation’s finest hour and at the height of US economic boom. Since then, the global economic environment has deteriorated, and this has strengthened the influence of trade protectionists in the US.
Also, the US has been shaken by the rise of China as a formidable competitor. The US has used trade as a tool to reassert its position as the pre-eminent global economic power. The Trump administration’s debilitating trade war with Beijing should be viewed within that context.
In the case of South Africa, the Clinton administration’s rationale for including the country in the original Agoa scheme was to support its democratic consolidation and integration into the global economy. The US has, however, historically never regarded South Africa as a developing country in the same way it has viewed other African countries. This American view of South Africa dates back to the post-war years when the country was seen as a part of the developed “western bloc” that shaped the new world order. It is for this reason that when South Africa, in the early 1990s, applied to the World Trade Organisation for reclassification as a developing nation the US, supported by the European Union and Japan, objected.
Early this year the Trump administration revived this historical position on South Africa and revoked the country’s “developing country” status. This followed a similar decision by the US in respect of China and India. It means that these countries will no longer enjoy the preferential trade treatment extended to poor nations. A Biden electoral victory is unlikely to deviate from the path set by the current administration. Trade is one of the very few areas on which there remains strong bipartisan support.
Even self-proclaimed democratic socialists like Bernie Sanders have opposed free trade deals. Hilary Clinton, who lost against Trump in the 2016 poll, has a history of espousing inconsistent and ambivalent positions on trade. The outbreak of the coronavirus global pandemic, and the resultant damage it has inflicted on the US economy, will most likely reinforce bipartisan consensus on American trade policy.
What this means is that South Africa can no longer rely on Agoa as the centrepiece of its economic partnership with the US. Agoa is not a negotiated, reciprocal agreement: it is an American initiative that provides non-reciprocal trade preferences to African countries. The US can arbitrarily suspend or withdraw its benefits to participating nations.
Equity markets are mixed currently with US data expected to yet again show millions more Americans sought unemployment benefits over the last week. Equities rally continued yesterday on better than feared US jobs data while economies reopen around the globe.
Forex news
Currency Pair
Change
EUR USD
-0.27%
GBP USD
-1.85%
USD JPY
+1.25%
The Dollar strengthening has resumed today ahead of a Labor Department report expected to show over 44 million Americans likely sought unemployment benefits over the last eleven weeks. The live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, lost 0.4% Wednesday as Automatic Data Processing reported private sector employers cut less than expected 2.76 million jobs in May, while the Institute for Supply Management said its service PMI came in at 45.4 in May, above the consensus forecast of 44.7. EUR/USD and GBP/USD continued climbing yesterday as euro-zone services purchasing managers index rose to 30.5 in May from 12 in April, above the flash reading of 28.7 and a three-month high. Both pairs are down currently ahead of the European Central Bank policy decision today. Both USD/JPY and AUD/USD continued climbing yesterday with Australian dollar lower against greenback currently as Australian retail sales fell 17.7% in April, while yen still higher.
Stock Market news
Indices
Change
Dow Jones Index
-0.55%
Nikkei Index
+0.54%
Hang Seng Index
-1.2%
GB 100 Index
-0.32%
Futures on three main US stock indexes are down after a surge on Wednesday. Stock indexes in US ended sharply higher on Wednesday after data from Automatic Data Processing showed private sector employers cut much- less-than feared 2.76 million jobs in May, following a drop of 20.2 million in April. The three main US stock indexes recorded gains ranging from 0.8% to 2%. European stock indexes are mixed currently following a three-session-in-a-row rally despite Germany unveiling Wednesday its second economic stimulus package since the start of the coronavirus outbreak, which brings the total value to €1.3 trillion ($1.5 trillion). Asian indexes are mixed today after Trump administration suspended passenger flights by four Chinese airlines to and from the United States starting June 16, citing failure by Beijing to approve a resumption of flights to China by United and Delta Airlines.
Commodity Market news
Commodities
Change
WTI Crude
-0.02%
Brent is edging lower today. Prices rose Wednesday after reports that Saudi Arabia and Russia have reached a preliminary agreement to extend existing cuts by one month instead of gradually lowering the reductions to 7.7 million barrels starting in July. The US oil benchmark West Texas Intermediate (WTI) futures rose: July WTI added 1.3% but is falling currently. August Brent crude closed 0.6% higher at $39.79 a barrel on Wednesday.
Gold Market News
Metals
Change
Gold
-0.07%
Gold prices are extending losses today. August gold lost 1.7% to $1704.80 an ounce on Wednesday.
Note: This overview has an informative and tutorial character and is published for free. All the data, included in the overview, are received from public sources, recognized as more or less reliable. Moreover, there is no guarantee that the indicated information is full and precise. Overviews are not updated. The whole information in each overview, including opinion, indicators, charts and anything else, is provided only for familiarization purposes and is not financial advice or а recommendation. The whole text and its any part, as well as the charts cannot be considered as an offer to make a deal with any asset. IFC Markets and its employees under any circumstances are not liable for any action taken by someone else during or after reading the overview.
By Hussein Sayed, Chief Market Strategist (Gulf & MENA), ForexTime
The rally in global stocks led by the US has taken some indices close to their record highs made before the Covid-19 outbreak. The Nasdaq composite has gained 46% since bottoming out on March 23 and is only 1.6% away from its all-time high, while the S&P500 is up 42% for the same period and just 8.7% from its record. This has now officially become the strongest ever rally following a major shock.
I admit that I am astonished by how far risk assets have moved over the past 50 days, and one thing we might have learned is to follow the central banks regardless of our views on economic fundamentals.
Although some metrics are showing signs of improvement, the real economy is coming from an exceptionally low base. With more than 40 million Americans applying for unemployment benefits since the beginning of the crisis and an expected contraction of 52.8% in second-quarter GDP according to the Atlanta Fed, the disconnect between asset prices and economic fundamentals is hard to justify. Add to this a 12-month price to earnings ratio of 22 times for the S&P 500 which is the highest since the 2000 dot com bubble and things don’t make a lot of sense.
Coming back to the point of following central banks regardless of your views on fundamentals, the question becomes how much further can central banks continue supporting markets? That depends on so many factors including actions from fiscal policymakers, the economy getting back to life, the discovery of a treatment or vaccination for Covid-19, no second wave of infections and layoffs, consumers’ confidence in spending and companies generating positive cash flow. If these factors remain missing, the rally in stocks may not last much longer.
That is not to say you should bet against stocks. The rally could have another leg higher, especially as the dollar looks to be on a downward trajectory, which may be a sign that investors are growing more optimistic and increasing their risk exposure. However, for those who have made significant gains over the past couple of months, protecting their portfolios from the downside may be a good idea.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
EURUSD is taking a breather around the 1.123 mark after posting seven consecutive days of gains, as markets await a key decision by the European Central Bank later today.
It remains to be seen whether the currency pair can truly break past the 1.123 resistance area, which proved resilient in August and December 2019.
Although the ECB is set to leave benchmark interest rates unchanged, the central bank is expected to add some 500 billion Euros to its Pandemic Emergency Purchase Programme, which aims to provide support for the EU economy. Even though policymakers have only spent less than a third of the 750 billion Euros allocated for the rescue package when it first began in March, markets are already demanding that more be added.
Should the ECB hold back and not confirm market expectations over that 500 billion Euro top-up, such a surprise could see the Euro unwinding recent gains against the US Dollar, and push EURUSD back closer towards the 1.10 psychological level.
EU hobbles its way to a recovery
The Eurozone economy needs all the help it can get in order to stage a meaningful recovery.
Germany is certainly doing its part, with Chancellor Angela Merkel’s political coalition giving the green light to a 130 billion Euro stimulus package. This latest move means that Germany’s economic rescue measures have totaled over 1.3 trillion Euros since March. Even then, Europe’s largest economy is forecasted to contract by more than six percent this year.
The Eurozone’s Markit Services and Composite PMIs that were released on Wednesday are still firmly in contraction territory, even as the drop was not as steep as prior months. This suggests that the post-lockdown recovery could be a long, arduous journey, with fiscal and monetary stimulus serving as crucial crutches for the Eurozone economy as it strives to find a firmer footing in this post-pandemic era.
Such an outlook has translated into a weaker Euro against most of its G10 peers so far this month, despite the bloc’s currency having strengthened against safe havens such as the Japanese Yen, Swiss Franc, and the US Dollar during the same period. Barring even more injections of stimulus measures, or a drastically brightening outlook for the EU economy, EURUSD is less likely to return to the 1.15 high.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
