In Asia-Pacific midday trading on Monday, the euro against the U.S. dollar hit a new daily low of 1.0854, with the decline extending to 0.19%. As the U.S. dollar index rose again and approached the 100 mark, the IMF predicted that the United States would lead the global economic

At noon in the Asia-Pacific on Monday (April 20), the euro against the U.S. dollar hit a new daily low of 1.0854, with the decline extending to 0.19%. As the U.S. dollar index rose again and approached the 100 mark, IMF predicted that the United States would lead the global economic contraction this year, accounting for expected More than 30%, and economic data indicate that the worst is yet to come, boosting the dollar's appeal as a safe-haven currency.

Euro vs. U.S. Dollar trend chart

According to a report released by the U.S. Commodity Futures Trading Commission on April 17, as of the week from April 8 to April 14: Speculators’ speculative net long positions in the euro increased by 6,993 contracts. To 86,617 contracts, investors' willingness to be bullish on the euro has increased.

Although the willingness to be bullish on the euro has increased, pessimistic predictions about the euro against the dollar are still emerging, although this Thursday's EU leaders' meeting is expected to boost the euro's recovery.

foreign exchange analyst James Skinner believes that one of the decisive factors that determines the trend of the euro against the US dollar this week may be the outcome of the video meeting of leaders of the European Council on Thursday. At this meeting, leaders of various countries will either reject or jointly support the EU's 540 billion euro plan to deal with the epidemic crisis. Just a week ago, euro zone finance ministers agreed to the plan, but Italy initially said it would object this week.

It is worth noting that since then, Italian Prime Minister Conte has repeatedly hinted that he may support the rescue plan at this week’s EU leaders’ meeting, which may alleviate external concerns about possible financial crises in the euro zone’s “peripheral countries”. concerns about instability, and political divisions fueling anti-euro sentiment in Italy. This could provide breathing room for both the euro and the U.S. dollar amid dollar strength earlier in the week, although this will all depend on the direction of the technical chart, which has turned neutral recently.

It remains to be seen whether the euro can gain enough momentum from the European Council outcome to successfully break through technical resistance. Prior to this, the exchange rate trend relied heavily on technical aspects, and the flag signals on the daily and weekly charts suggested that the rebound was expected to continue to expand.

Is the euro against the dollar expected to rebound this week?

Foreign exchange analyst James Skinner said that if this flag trend is confirmed, it means that the euro against the dollar may rebound to around 1.1500. He believes that extrapolating from last Friday's closing levels, EURUSD will break through the 1.1500 level.

(Daily chart of EURUSD)

Institutional investment banks are not optimistic about the future trend of the euro

According to epidemic data, as of 14:00 Beijing time on March 31, there were more than 660,000 patients with new coronary pneumonia in Europe, including Italy, Spain, and the United Kingdom. , France, and Germany all have more than 100,000 cases, and the most serious country, Spain, has a cumulative confirmed case count of 198,674.

The epidemic will naturally affect the euro zone economy. A report from the German Ministry of Economic Affairs shows that German industrial activity may collapse in March and the second quarter. The German epidemic is affecting the job market. More than 1 million employees are under the short-term work plan. The unemployment rate will rise. The German economy entered a recession in March. The recession is expected to last until the middle of this year. Global demand collapses, supply chains are disrupted, consumers Behavioral changes and investor uncertainty are having a huge impact on Germany.

Some people have summarized the far-reaching impact of the new coronavirus epidemic on the European economy, saying that economically it is comparable to the global Great Depression of the 1930s; financially, it is comparable to the 2008 European debt crisis.

The International Monetary Fund (IMF) said in its latest " World Economic Outlook Report " that the U.S. economy is expected to shrink by 5.9% this year and the euro zone economy will shrink by 7.5%. The economic situation in Italy and Spain will be particularly difficult, with gross domestic product (GDP) shrinking by 9.1% and 8% respectively. These two countries are among the hardest hit by the COVID-19 pandemic in Europe.

ANSA recently reported that Goldman Sachs in the United States has adjusted its forecast of the impact of the COVID-19 epidemic on the euro zone economy. Goldman Sachs Group predicts that the euro zone’s full-year GDP growth rate in 2020 is expected to be -9%. Among them, Germany -8.9%. Since Italy, Spain, and France have adopted stricter blockade measures than Germany, the shrinkage of the three countries is slightly higher than that of Germany, which are -11.6%, -9.7%, and -7.4% respectively.

Strategists expect the euro to fall as the coronavirus pandemic hammers the European economy and raises concerns about the region's ability to overcome a surge in debt loads.

JP Morgan said that in the event of a full-scale debt crisis, the euro/dollar could fall below parity for the first time since 2002. Dutch bank predicts that speculators who are currently net long on the euro may be squeezed if the market falls into a risk-off mentality again. Options data showed traders were the most bearish on the euro in more than a week. The euro was trading around $1.0878 on Friday.

Many strategists entered 2020 cautiously bullish on the euro. As economic data improves, they expect the euro zone economy to bottom out this year. However, the pandemic and its impact on the economy have dashed this forecast.

In response to the crisis, euro zone governments have launched hundreds of billions of euros in support measures, including emergency loans, credit guarantees, employment subsidies and medical and health investments. However, it has been difficult for Eurozone countries to agree on a joint response.

Paul Meggyesi, head of FX strategy at JPMorgan, said in a note on Friday that the euro faced the possibility that "shocks to economic growth and debt levels, if severe enough and without debt mutualisation, could undermine this." The structure of a currency itself.”

JP Morgan lowered its one-year price target for EUR/USD to $1.06 from $1.08. ABN AMRO reiterated its forecast for the euro to reach $1.05 in the second quarter and rebound to $1.12 by the end of the year. TD Securities recommends holding short exposure to EUR/USD via a two-month put spread.

ABN AMRO predicts that speculators who are now net long on the euro may be squeezed if the market falls into a risk-off mentality again. ABN AMRO reiterated its forecast for the euro to reach $1.05 in the second quarter and rebound to $1.12 by the end of the year. .

TD Securities recommends holding short exposure to EURUSD via a two-month put spread.

Analysts at Credit Suisse remain bearish on the euro against the dollar. Analysts at the bank pointed out that the euro-dollar exchange rate experienced ups and downs in March, but is still below the key average level. The key trend follows multiple indicators and points to lower levels in multiple time frames; it needs to fall below 1.0768 in the long term. An upward trend can finally accelerate the downward momentum. The next support level is at 1.0636, which is not the low of 1.0341 in 2017. Analysts pointed out that on the upside, the resistance is at 1.1163, which is now the ideal upper limit. Only when it rises back above 1.1495 can A significant bottom would be established, but not the fundamental expectation.

The median forecast in a Bloomberg survey still sees the euro hitting $1.10 in the second quarter and $1.13 in the fourth quarter.

Warm reminder: The market is changing rapidly, investment needs to be cautious, and the operation strategy is for reference only.