one to one coaching

(Discuss) EUR/USD: Staying Bearish

Andora Andrei

Active member
The bears are mounting against the euro and EUR/USD is indeed falling. But the moves are relatively slow.The dollar’s appreciating trend has intensified as the anticipated policy dynamics of an expansionary fiscal stance and higher interest rates under a Trump presidency have proved to be a powerful dynamic for the currency. DXY is now at its strongest level since Q1 2003 and market expectations are growing that the dollar may rise materially further over the medium term as fiscal expansion is overlaid on an economy operating at or very close to full employment. The sharp rise in bond yields has also assisted dollar strength.

That said, we are cautious about getting caught up in the whirlwind and revising up our dollar forecasts higher just now based on anticipated US economic policy.

We anticipated a move into a 1.00-1.05 range for EUR/USD next year, as whoever was elected president would pursue a more expansionary agenda. That view still remains the case and there are a number of reasons why we are hesitant to revise up our forecasts.

Based on the DXY, the dollar is at its highest level since 2003. But it is interesting that in 2003 the dollar was in a pronounced depreciation phase amid (then) President Bush’s policy agenda of steel tariffs (2002) and tax cuts, whilst inflation was also rising. Currently, US inflation is rising and the US President-elect's indicated policy priorities of renegotiating trade arrangements, threatening higher tariffs, and cutting taxes is having exactly the opposite effect on the USD. At present, various PPP estimates, ranging from producer prices to the Big Mac index, imply the euro is around 20% undervalued versus USD.

Pip Up

The euro was making little gains ahead of the crucial ECB meeting which took place on Thursday. The euro however consequently was weakened by the decision of the ECB to extend their assets buying program.


New member
EUR/USD reached new highs only to fall sharply as Italy’s budget came to the forefront. The issues are far from being resolved. PMI data stands out in the first week of Q4. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.

The Italian government decided on a budget deficit of 2.4% of GDP, higher than what the technocratic finance minister Giovanni Tria wanted, 1.6% and more than the EU wanted. The plunge in Italian stocks and bonds weighed heavily on the euro but the populists’ parties that govern the euro zone’s third-largest economy are not impressed. Core inflation disappointed with 0.9%. On the other hand, ECB President Mario Draghi was bullish on the prospects of core inflation rising up and on the acceleration in wages. In the US, the Fed raised rates as broadly expected and signaled four rises until the end of 2019. However, the removal of the words “accommodative policy” initially hurt the greenback. Fed Chair Powell’s optimistic message and his clarification that the outlook had not changed eventually sent the greenback higher. US data was mixed, yet mostly positive.

  1. German Retail Sales: Monday, 6:00. Consumers have disappointed in the continent’s largest economy. After a drop of 0.4% in July, an increase of 0.4% is on the cards for August.
  2. Manufacturing PMI: Monday, 7:15 for Spain, 7:45 for Italy, final French figure at 7:50, final German at 7:55 and the final euro-zone one for September at 8:00. Markit’s forward-looking gauge for Spain stood at 53 points in August, only slightly above the 50-point threshold separating growth and contraction. A drop to 52.7 points is on the cards. Italy had a score of only 50.1 and a minor increase to 50.3 is on the cards. The preliminary measure for September for France stood at 52.5, for Germany at 53.7, and for the full euro-zone at 53.3 points. The initial numbers will probably be confirmed.
  3. Unemployment Rate: Monday, 9:00. The jobless rate in the euro-zone is on a continuous decline. After 8.1% in July, another slide to 8.1% is on the cards for August.
  4. Spanish Unemployment Change: Tuesday, 7:00. Spain, the fourth-largest economy, still suffers a high unemployment rate. After an increase of 47K in August, the fresh figure for September is projected to show another rise of 28.2K.
  5. PPI: Tuesday, 9:00. The Producer Price Index rose by a healthy 0.4% in July. An increase of 0.2% is forecast for August. Prices at factory gates eventually reach consumers.
  6. Services PMI: Wednesday: 7:15 for Spain, 7:45 for Italy, final French figure at 7:50, final German at 7:55 and the final euro-zone one for September at 8:00. The Spanish services PMI stood at 52.7 and is now projected to move up to 52.9. Italy’s figure stood at 52.6 points in August and also here, a small increase to 52.8 points is on the cards. The initial read for France’s services PMI for September was 54.3, for Germany 56.5, and for the euro-zone 54.7 points. These numbers are expected to be confirmed.
  7. Retail Sales: Wednesday, 9:00. While the main countries will have already published their consumption data, the overall number for the 19-country currency bloc can surprise. An increase of 0.2% in August is predicted to follow the 0.2% drop in July.
  8. German Factory Orders: Friday, 6:00. Orders at factories fell by 0.9% in July, short of expectations. An increase of 0.7% is now projected at this volatile measure.
one to one coaching