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EUR/USD is advancing toward 1.13 as China encourages a bull market. Optimism about Europe joins the bullish case while US coronavirus cases and uncertainty about data may weigh on the pair, FXStreet’s analyst Yohay Elam informs.

Key quotes

“After a long US weekend, bulls have returned with rage – kicking it off in China. The media in the world’s second-largest economy has been touting a rising stock market to follow on the economic recovery. According to a ranking by Baidu, the leading search engine in China, mentions of rising stocks are up ten times in comparison to the past 90 days. State media has a significant influence.” 

“Another positive factor for EUR/USD comes from optimism about the old continent’s prospects. Goldman Sachs and officials at the Bank of France have expressed satisfaction about the bounce in economic activity as the old continent seems to have COVID-19 under control.” 

“Europe may be already benefiting from the EU Fund – which has yet to be approved and will kick in only in 2021. The signal from policymakers encourages investment. Moreover, support from the ECB is also boosting sentiment. Christine Lagarde, President of the ECB, reiterated her commitment to supporting the economy and also battle disinflation.” 

“While markets were closed in the past three days, coronavirus cases continued rising, nearing three million. Deaths are close to 130,000 and hospitals in Houston are bringing bad memories of those in New York in April – losing control. New COVID-19 figures form Texas, California, and Florida may weigh on sentiment later on.”

“Another reason that may weigh on sentiment and boost the safe-haven greenback stems from skepticism about the data, which is not keeping up with the surge of coronavirus. The ISM Non-Manufacturing Purchasing Managers’ Index is due out on Monday and may also surprise to the upside – yet draw the same shrugging off. Higher-frequency figures such as gasoline consumption, restaurant reservations, and weekly jobless claims are more timely.”