Euro eyeing out 1.18 against the dollar

by Jul 28, 2020Market Reviews

Euro eyeing out 1.18 against the dollar

The Euro has been on a tear recently, up 8.55% against the US Dollar over the past three months as investors become increasingly more confident in the continent.

Euro against the US Dollar over the past three months

Euro advancing on positive and united Coronavirus response

The European Union recently has had many tailwinds as of late: Containment of Covid-19, general alignment in how to combat the Coronavirus, and their 75 Billion euro recovery package lead investors to believe that Europe is where outperformance is.

Given the recent expansion in the valuation of US equities, specifically tech stocks in the NASDAQ, the premium for owning non-cyclical internet businesses have been quite expensive. The NASDAQ trades at a 29.88 multiple, making value stocks such as banks in Europe look dirt cheap. For example, UBS and Deutsche Bank have a price/earnings ratio at 9.69, and Deutsche Bank has a negative P/E ratio with both trading at price/book value of less than 1. Therefore, the Euro may be getting a boost from US investors pulling their money out of the local market and investing in companies in Europe.

There has been an increase in technical factors pushing the Euro higher. Recently, we have seen the EUR/USD push above its 200-day moving average during its recent push past 1.17. The last time the Euro pushed past the 200-day moving average was in 2018. We may see Euro gap 1.18 on worsening US macro conditions and a more pessimistic view from the Fed than was expected this coming week.

US Dollar Index

However, the Euro’s strength may be partially due to the weakening in the US Dollar. The Dollar index is down 6.58% in the past three months. With the US still pumping cases across the states with no official Coronavirus plan, investors have lost interest in the US Dollar safe-haven trade as value pops up across Europe. With that said, the US reported 65,809 daily cases, a 1.6% decrease from the previous weeks’ 7-day moving average. This is a positive sign for US strength; however, this is still miles away from flattening the curve, as many other countries have done.

Anish Lal, an analyst here at BlackBull Markets did an excellent overview on the 200 day average for the Euro/US Dollar. You can watch it here.

 

Related Posts

New Zealand dollar push to 70c?

New Zealand dollar push to 70c?

New Zealand dollar to 70c? As the dollar continues, it's a downward spiral, risk-on currencies such as the New Zealand dollar have seen a rise in value. I have talked about how the market is slowly pricing in the long-term effects of the Coronavirus on...

read more
Interest rates, Non-farm payroll – Week ahead

Interest rates, Non-farm payroll – Week ahead

Coronavirus cases have passed 18 million across the globe, with deaths approaching 700k. Markets are slowly pricing in how the Coronavirus is affecting countries’ respective markets. The US Dollar is down 10% from its March highs, and the ASX is slowly edging down, booking losses three weeks in a row. This is your week ahead.

read more
Pound rallies on weakening dollar

Pound rallies on weakening dollar

GBP/USD broke 1.30 today, a critical resistance that signals a strong bullish sentiment on the Pound as the dollar weakened on the Fed, sending full message support. Jerome Powell stated that they would keep all support lines open, including bond-buying, low-interest rates, and central bank dollar swaps. Jerome Powell emphasized, “[the fed] is not thinking about thinking about thinking about raising rates.” Andrew Slimmon, Senior Portfolio Manager at Morgan Stanley, stated that the “Fed would keep supporting risk assets.”, suggesting that it would be an excellent time to be long in risk assets.

read more

Black Bull Group Limited (trading name: BlackBull Markets) is a New Zealand registered and incorporated company (company number: 5463921). We are also registered with the Financial Services Provider Register (number: FSP403326).

Black Bull Group UK Limited is registered in United Kingdom, Company Number - 9556804. Payment clearing services provided by: BlackBull Group UK Limited (Company Number - 9556804) Address - 483 Green Lanes, London, Greater London, United Kingdom, N13 48S

Risk Warning: Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money you cannot afford to lose. You should make yourself aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any questions or concerns as to how a loss would affect your lifestyle.

Copyright © 2020 Black Bull Group Limited. All Rights Reserved.

Share This