EUR / USD forex forecasts indicate stable outlook in July and little volatility, but if the crisis accelerates in the medium term and the Federal Reserve fails to stabilize the markets, everything will change.
The US dollar has had a strong run against the euro for a long duration, but the history of trading teaches that there have been periods in the recent past when a comfortable range for the European currency against the dollar was between 1.2500 and 1.3500. Pre-financial crisis issues of 2008, the USD seemed comfortable enough to trade even at weaker values than the EUR.
However, the financial upheaval of twelve years ago created a radical change between central banks globally. The European Central Bank and the American Federal Reserve have reacted in several ways. It can be argued, but the perception among central bank followers is that the Federal Reserve may be more aggressive than the ECB, which must fight with its member states to create a cohesive economic policy.
The Federal Reserve keeps the dollar weak, but the crisis can change everything
While the coronavirus crisis poses uncertainties about the economic recovery, we are witnessing the same problems regarding the central monetary authorities that emerge and create obstacles. This time, however, critics are escalating and say the Fed is exaggerating, buying corporate bonds and infusing money into the stock markets, buying ETFs and other assets that help create (too much?) positive sentiment on Wall Street.
The Federal Reserve’s behavior preserves global risk appetite and this has created purchases for the EUR / USD pair in a range that can be traded based on trends and timing considerations.
The EUR / USD was trading in the range of around 1.1160 to 1.1350 for most of June. With its current price range, the US dollar appears to be around the 1.1180 mark, but this may not happen if the risk appetite should fail and safe harbor traders could seek the US dollar in the event of a stock market crash.
However, the question asked with a medium-term perspective is: will the Federal Reserve allow this to happen?
In the medium term, the USD may be able to maintain its rather prosperous tone and its value will remain the right currency when the problems arrive globally. International trade still relies heavily on USD for transactions and trade. However, if Federal Reserve policy starts to falter and they cannot save the stock indices if things go wrong in the United States and the world, then there will be a storm of volatility in the forex markets as people begin to question the long-term US dollar real value against other major currencies.
In the medium term, the USD could maintain its current value and remain the safe haven currency if and when the problems are global. International trade still relies heavily on USD for transactions.
However, if the Federal Reserve policy started to falter, it could not save the stock indices if things were to get worse now in the United States and in the world, then there will be a storm of volatility in the forex markets and ordinary people, not only investors will begin to question the long-term real value of the US dollar against other major currencies.
EUR / USD outlook for July
EUR / USD appears to be in a fairly comfortable trading range right now. If investor sentiment suddenly worsened, there would be many sales for EUR / USD. However, it is likely that there will be no major problems on Wall Street in July, so the USD may maintain its recent weakness against the EUR and speculators could continue to buy the EUR / USD, with the hope that the resistance will continue. to be tested progressively if the risk appetite remains good at an international level.
Speculative price range EUR / USD is between 1.1050 and 1.1450 – Support at 1.1100 looks relatively strong in the medium term, but if swept away the EUR / USD may falter at 1.1050 – Resistance at 1.1350 appears difficult, but if it proves vulnerable, EUR / USD could reach 1.1450.