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13.11.202009:48 Forex Analysis & Reviews: EUR/USD: Calm euro against the unstable US dollar

Long-term review

Exchange Rates 13.11.2020 analysis

The post-election rally observed after Joe Biden's victory marked further directions for the key currencies – the US and European. Experts believe that the main trends in the dynamics of the Euro and the US dollar in the EUR/USD pair are related to market leadership issues.

Throughout the whole week, the European currency was under serious pressure from the rising US currency. Therefore, it had to resist the dollar's strengthening, which recently showed weakness across the entire market spectrum. However, the euro is now relatively calm, contrary to the dollar, which is in an unstable position.

A lot of experts are afraid that the euro may fall into the grip of economic measures initiated by the European regulator. As a result, it may find itself between ECB's fiscal stimulus and negative interest rates. Several economists expect the regulator to expand the emergency asset purchase program in the amount of € 500 billion and extend its validity until the end of 2021 amid the prolonged COVID-19 pandemic. At the same time, they expect that the issue of negative rates will be done, and the negative scenario for the Euro will not be implemented.

So, both the European and American currencies have become victims of monetary stimulus from their central banks. This week, the US Treasury and the Fed poured $ 10.42 billion into the country's financial system. Economists believe this negatively affects the dollar's price. At the same time, the volume of financing from the ECB also increased, which resulted in an additional € 21.14 billion appearing on the regulator's balance sheet. According to experts, the massive printing of money in the eurozone negatively affects the euro exchange rate.

The US dollar is also having a hard time, which experienced the strongest volatility this week – sharply rising and declining. However, it remains hopeful for a favorable combination of circumstances. Experts do not rule out that it will get a new impulse to rise under the presidency of Mr. Biden.

The consequences of a small imbalance were also recorded in the EUR/USD pair. The indicated currency experienced an up and down movement for several days, trying to regain its lost balance, which has succeeded so far. Today, the EUR/USD pair is trading in the range of 1.1807-1.1808. It added 0.3% yesterday, rising to the level of 1.1810.

To conclude the results of the post-election rally of major currencies, experts note the predominance of competitive sentiment in the EUR/USD pair. The US dollar is still striving to become the undisputed market leader, while the euro does not want to yield. Nevertheless, the EUR/USD pair is currently maintaining a relative balance, which sets analysts up for positive forecasts in the short and medium term.

Larisa Kolesnikova,
Analytical expert of InstaSpot
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