EURUSD Forecast: Upside is limited
The impact of the coronavirus pandemic on the economies of the EU member countries was different. While many countries announced the second lockdown, the damage of the pandemic was greater in regions where the economy was solely based on tourism, such as Spain and Southern Italy.
On the other hand, negotiations are continuing between Brussels and London regarding Brexit, which is expected to end on December 31, while the ECB is looking for a solution to the problem with a new stımulus package.
On the US side, the elimination of uncertainty regarding the presidential election and the economic recovery stands out as positive developments for the dollar. ( The latest data set was mixed with worse than expected retail sales while the employment part of the economy is recovering faster than expected ) Regarding the stimulus package, there is no new development at the moment.
When we compare the balance sheet sizes, it is remarkable that the European Central Bank is gradually accelerating while the Fed slows down its growth in the 3rd quarter of 2020.
While issues such as weak economic conditions in the European Region, balance sheet growth rates among central banks, and Brexit continue to swing like the sword of Damocles on the Euro, I think the upward movements of the pair will be limited.
Looking at the matter from a technical point of view:
Weekly Chart:
The pair tested the long-term bearish trend line resistance and failed to break and close above.
1.2000 horizontal resistance is likely to be unbreakable when considering the current balance sheet sizes and the possible expansion of the ECB.
Smaller Charts H4
1.18500-1.18200 interval is the key support. I predict the sales to be accelerated by the breakout of 1.18200.
What can be done?
I expect the weakness to continue as long as the EURUSD Futures remains below 1.20500.
If the price breaks 1.18400, my targets are:
1.18200
1.17700
1.16900
1.14000 and the measured moved target of 1.12400.
What to pay attention to? A daily closing above 1.20500 would invalidate the technical aspect of the forecast.
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