FUNDAMENTAL EURO FORECAST: BEARISH
Renewed optimism about the EU market and its own Covid-19 vaccination program has lifted EUR/USD in recent days.
However, the EU market is still underperforming and doubts about the AstraZeneca vaccine can decrease the amount of people agreeing to have the jab.
Which suggests that once the present bout of profit-taking and short-covering has ended, EUR/USD might go lower again.
EURO PRICE AT RISK OF FURTHER FALLS
Growing optimism about an EU economic recovery has lifted EUR/USD in recent days, reducing the losses endured since the beginning of this season. For some analysts, the progress suggests that a new trend greater is presently in place. There are, however, grounds for caution.
To begin with, the economic recovery is based on optimism that the EU’s Covid-19 vaccination program has now picked up after a slow start. Note, though, that many EU citizens continue to be wary of the AstraZeneca/Oxford vaccine though the European Medicines Agency said last week that”the overall advantages of the vaccine in preventing COVID-19 outweigh the dangers of side effects”.
There also have been reports of flaws to supplies of this Moderna vaccine to Germany, even though that was denied by the provider.
If take-up is indeed low, that will interfere with an economic recovery that’s anyway expected to become relatively weak. The International Monetary Fund forecast a week that growth in the Eurozone would be reduced this season than in the US or the UK, and that is sure to have a direct impact on both the EUR/USD and EUR/GBP.
Against this background, it’s likely that EUR/USD has run ahead of itself, together with the advance representing only profit-taking and short-covering following the previous slide, and that once the position-squaring is finished EUR/USD will resume its path downwards.
Turning to the financial statistics in the week beforehand, the sole release of notice is that the ZEW indicator of German economic belief, which is expected to climb to 79.1 from 76.6. Otherwise, Eurozone retail sales, industrial manufacturing and last inflation figures are unlikely to interest the markets.
