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Euro approaching 1.165 as bull run softens

Euro approaching 1.165 as bull run softens

The Euro against the US Dollar is approaching 1.165 – a historically busy support/resistance area.

EUR/USD Entering a strong support/resistance zone

Traders and investors in the past couple of months have seen an 11% appreciation in the Euro. From a country's viewpoint, an appreciating currency is seen as bad as it makes the countries (in the case, the continents') exports more expensive for other countries. This is incredibly tough on German and French car automakers, as it means their cars would be more costly to sell overseas. On the contrary, this makes importing goods from other places cheaper.

Christine Lagard has tried to talk down the Euro's appreciation, stating that she was "very attentive to the appreciation of the Euro." Furthermore, Philip Lane, the ECB's chief economists, noted that the "euro-dollar rate does matter

Historically, the Euro has been higher. Before the Global Financial Crisis in 2008, it was at around the 1.50 level. However, the pair is twofold – we have to figure out what will happen to the US dollar – primarily hinging on the market's expectation of the election and general economic trends.

A possible bull run in the US dollar may slow Europe's recovery.

The US dollar is up 1.4% this week, reducing its 2020 decline to around 2.2%. The dollar has slowly rallied on the selloff of US equities from their all-time high. With a historically inverse correlation with Gold, the yellow metal has been suffering as investors and traders weigh up the possibility of the Fed actually reaching that 2% inflation target.

Furthermore, with interest rates at a record low, negative yields for long term bonds make it more appealing to hold the US dollar instead of bonds.

And if Biden wins the presidency? Considering he wants to enact tax hikes and expensive green policies, the US dollar should depreciate against its peers. However, if Trump is re-elected, we may see the opposite due to his pro-business, low tax policies. However, this may be totally incorrect, depending on market sentiment regarding the Coronavirus at the time.

What's your thoughts on the US dollar?

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