EURUSD, EURJPY, EURGBP, EURCHF, EURSEK and EURNOK forecasts
In this analysis we are going to spotlight the Euro in the aftermath of the substantial price action seen throughout global financial markets in March, April and into May, since the spread of the coronavirus, COVID-19 into Europe and the US.
Together with the impulsive moves across global stock markets, the Forex markets have seen significant price movements, with the Euro a notable mover.
We will look at the Euro against the US Dollar, the EURUSD Forex rate, but will also spotlight the Euro versus the Japanese Yen (EURJPY) plus against a number of the other major European currencies, with our EURGBP, EURCHF, EURSEK and EURNOK forecasts.
Macroeconomic backdrop
Global financial asset classes suffered a massive “risk off“ shock in March as the COVID-19 coronavirus spread from Asia, to Europe and the United States. Global stock markets plunged, whilst safe havens assets (such as Government bonds and Gold) surged higher.
In the Forex environment, most currencies plunged lower versus the US Dollar in March, as Forex markets saw a global thirst for US Dollars, with the US currency became the ultimate “flight to quality” currency.
April and early May has seen a shift to a “risk on” theme, with global stock markets rebounding, and the “risk currencies” the Australian, New Zealand and Canadian Dollars strengthening. But in this “risk on” scenario, the Euro has remained under negative pressures.
Technical Analysis of the Euro
The EURUSD Forex rate plunged lower in March with the global financial market panic as the US Dollar surged.
But the Euro was sideways and erratic in this “risk off“ phase versus the traditional safe havens, the Japanese Yen and Swiss Franc, whilst strengthening against the European periphery, versus the GB Pound, the Swedish Krona and Norwegian Krone.
With the resumption of the “risk on” theme through April and into May, the Euro has been choppy, but overall negative against the US Dollar, but notably weakened against the European periphery.
EURUSD forecast
A very erratic, broad consolidation theme through April and into May for EURUSD, after the plunging selloff in the first half of March and the surging recovery in latter March.
The underlying theme stays bearish from the negative April consolidation, whilst below 1.1039.
An even more bearish intermediate-term view for EURUSD in May needs a push below 1.0725 and 1.0633.
This can offer a move to 1.0500, 1.0340, maybe 1.0000 (parity).
What changes this? Above 1.1039 aims for 1.1147 and 1.1367 chart targets.
An erratic selloff for EURJPY since the start of 2020, with the latter March, mid-April and early May bearish accelerations sustaining the overall bearish theme.
A still more bearish intermediate-term EURJPY view for May needs a push below 114.42.
This can offer a move to 112.08, 110.00 and 109.53 chart targets.
What changes this? Above 117.78 chart and retrace barriers aims for 119.04 and 119.71 chart and retrace targets.
An erratic, but negative consolidation phase for EURCHF through April and now into May, after the early 2020 plunge and negative extensions in March and April.
Although erratic, the EURCHF forecast remains negative from this early 2020 selloff, whilst below 1.0635/55, retrace /chart resistances.
A still more bearish intermediate-term view for May needs a push below 1.0510.
This can offer a move to 1.0315, 1.0235 and maybe parity, 1.0000.
What changes this? Above 1.0635/55 aims for the 1.0710/16 chart/ retrace target, maybe 1.0788.
An erratic grind lower through April and a plunge at the end of the month and into early May, to now push below the 78.6% retracement (at 10.6080), of the whole rally from the December 2019 low (at 10.3972) to the mid-March spike high (at 11.3822).
An even more bearish intermediate-term view for May needs a push below the 10.4882/1715 area to aim then for 10.3972 and 10.1261/0963 supports from 2018.
What changes this? Above 10.8991 aims for the 11.1093 chart target.
A surging rally and then a plunging selloff in March for the EURNOK Forex rate, to probe the 618% retracement of the Q1 2020 rally, at 11.0848.
A still more bearish intermediate-term EURNOK view for May would see a more aggressive break below this support (at 11.0848), to then aim for retrace/ chart targets at 10.5180/4350 and maybe as low as 10.0013, even 9.7959.
What changes this? A more positive intermediate-term view for May needs a push above 11.6968 for 11.8185, maybe then even towards 12.7562.
The intermediate-term Euro outlook: a summary of our Forex forecasts
In conclusion then, we see a bearish environment for the Euro against most of these major currencies, but particularly with risks skewed towards a weakening of EUR versus the Japanese Yen EURJPY), the Swedish Krona (EURSEK) and Norwegian Krone (EURNOK).
BUY - rate is expected to increase, i.e. the first currency gains value against the second currency.
SELL - rate is expected to go down, i.e. the first currency is expected to lose value against the second currency.
EUR/CHF – Live and Historical Rates
The Swiss Franc and the Euro are both among the most traded currencies, yet the pair that they make (EUR/CHF) isn’t considered a major one. The chart above illustrates the amount of CHF one will need to purchase one EUR. Given the proximity and close economic ties between the Eurozone and Switzerland, it isn’t surprising that the two currencies are indeed closely correlated.
The EUR
Launched in 1999, the EUR is currently the common currency used by some 21 countries that comprise the world’s largest economy, known as the Eurozone. More than 327 million people use the EUR as their official currency, while several other hundreds of millions use it de-facto, or use currencies pegged to the EUR. The EUR is the second most traded currency in the world and the second largest reserve currency as well.
The authority controlling the EUR is the ECB (European Central Bank) but its control is rather loose, compared to the sort of control exercised by the Fed over the greenback.
The CHF
The Swiss Franc draws it value from the economic stability of the country, its massive gold reserves and the sturdy finance industry for which the Swiss are indeed known world-over. Switzerland is not an EU member and it rejected joining the Eurozone too. This stance isn’t likely to change in the foreseeable future either.
The CHF was the currency the value of which was directly backed by gold for the longest time. It was only taken off the gold standard in 2000. Beforehand, gold made up some 40% of the value of the CHF.
EURCHF Analysis
Despite the fact that Switzerland never accepted the EUR, the Eurozone is obviously the largest trading partner of the country and its greatest economic influencer. The two economies are natural allies too, in the sense that they’re both based on manufacturing and services.
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