Due to ambiguous statistics on the US, progress in trade negotiations between Washington and Beijing, as well as an increase in the chances of a conservative victory in early parliamentary elections in the UK, the 'bulls" on EUR/USD managed to return quotes above 1.1000. It seems that the factors that supported the euro in October did not disappear, but only temporarily went into the shadows. Meanwhile, concerns about a slowdown in the US economy and the lagging dynamics of the S&P 500 index compared to its global counterparts next year are forcing investors to think again about the need to get rid of the greenback.
The October release of US retail sales exceeded analysts' expectations (+ 0.3% versus + 0.2% in monthly terms). At the same time, the September indicator was revised downward (to -0.1% monthly).
Following the release of US retail data for October, JP Morgan lowered its forecast for US fourth-quarter GDP growth from 1.75% to 1.25%.
According to Morgan Stanley experts, due to the slowdown in US economic growth and the global economic recovery, American stocks and corporate bonds will lag behind their foreign counterparts, and it was the success of the S&P 500 that served as one of the catalysts for the inflow of capital to the United States, which helped to strengthen American currency.
According to Nomura's forecast, by the end of 2020, the euro may rise in price against the dollar to $ 1.16 due to the growing risk appetite of investors. It is assumed that the de-escalation of the trade conflict in Washington and Beijing, as well as the UK's exit from the EU with the deal, will allow the currency block economy to move from a slowdown to recovery. In this regard, the reluctance of the Brexit party to obstruct the conservatives in the early elections and the statement of the US Secretary of Commerce Wilbur Ross about the high probability of signing a trade agreement between the United States and the Middle Kingdom allow the main currency pair to grow.
Also, last week, it became known that Germany managed to avoid a recession.
Against this background, the EUR/USD pair was able to find the "bottom" in the area of 1.0990 and recover to 1.1060.
However, despite the euro rebound, it is still premature to talk about the return of the main currency pair to the rally.
The "bulls" on EUR/USD are counting on a strong report on European business activity for November, as well as a split in the ranks of the ECB Governing Council, which the protocol from the October meeting of the regulator can say.
The "bears" are confident in the "hawkish" tone of the protocol from the last FOMC meeting and hope to hear hints from Christine Lagarde about expanding the monetary stimulus package from the ECB if necessary.
A short-term breakout of resistance at 1.1070 will allow EUR/USD to continue to move to 1.1110 – 1.1120. Otherwise, the risks of quotes returning to 1.1030 and 1.1000 will increase.