PrimeXBT’s Kim Chua Expects Further Fallout For The Euro In Q4, Here’s Why PrimeXBT Analyst Kim Chua: Euro To Weaken Due To COVID, ECB “Policy Bazooka”
During last week’s ECB meeting, President Christine Lagarde introduced a mix of policy measures she calls a monetary “recalibrating” on top of the already existing €1,350 billion in rescue funds as part of the Pandemic Emergency Purchase Programme designed to help save European economies ravaged by the COVID pandemic.
The “policy bazooka,” as PrimeXBT analyst Kim Chua calls it, combined with a return to COVID-related lockdown conditions, could cause the Euro to “weaken further” against its top currency adversaries. Here are all the reasons why Chua believes that the Euro is facing an extremely challenging Q4 and how traders can prepare with PrimeXBT.
With Rates At Record Lows And Economy In Recession, ECB Avoids Further Rate Cut
European citizens are feeling the sting COVID has dealt to the economy. Traders were hoping the ECB would respond with a rate cut. However, one never materialized during last week’s meeting. There, President Christine Lagarde focused on what she refers to as “recalibrating,” which could include an expansion of their asset purchase or an increase in PEPP, along with whatever other effective policy tools they can produce.
Q3 GDP figures showed some improvement, but its “water under the bridge,” according to PrimeXBT’s Kim Chua, who claims that Q4 numbers will be exceptionally weak as the near-term outlook deteriorates further into what Lagarde warned would be a ‘double-dip recession.’
Further Contraction Expected Due To COVID Complications In Q4
COVID was to blame for the first significant round of recession and ECB response, and a second wave of the virus causing another phase of lockdown restrictions could make matters worse. More major lockdowns will “weaken the Eurozone further,” with France already forecasting a potential -15% contraction in Q4 as a result. France just began a four-week lockdown starting in November, prompting the bleak forecast.
Lockdowns in Europe, while the US remains open, could leave the Euro in a weak position according to Chua. When uncertainty around the US election clears, the greenback could dominate. The impending stimulus bill is a significant factor currently preventing the Euro from tanking against the dollar.
The longer a decision lingers, the better chance the Euro has of delaying the decline against the dollar. Generally, when uncertainty is this strong, a selloff into safe haven assets like USD and JPY results, which would further devastate the trading pairs against the Euro.
EURUSD and EURJPY Q4 Technical Targets Following “Policy Bazooka”
Chua says that EUR could be a “good short” once the ECB reveals their “policy bazooka” and easing measures towards the end of the year, although she does say that it is possible to see “EUR crumble against USD and JPY sooner” than expected.
Technical targets project downside on the EURUSD pair, at around 1.1450 support. On the EURJPY pair, horizontal support was breached with last week’s fall, becoming immediate resistance. Because the RSI is exhibiting oversold conditions on the pair, Chua sees a pullback to resistance, where a short trade would have a target of 120.50.
EURUSD lost a long term uptrend line, so the downside could be significant now that the trend has changed.
Trade The Euro And Forex Market Volatility With PrimeXBT
While traders are often talking about stocks, Bitcoin, gold, or oil, they forget that the market with the highest trading volume globally is the forex market and that there are dozens of trading opportunities around every corner.
PrimeXBT is an award-winning cryptocurrency margin trading platform, offering long and short positions CFDs on Bitcoin, commodities, stock indices, and major forex currencies like USD, EUR, and JPY. The trading platform also offers more exotic pairs from emerging markets, such as TRY, MXN, and THB.
With PrimeXBT, traders can access industry-best technical analysis tools and set up a trading strategy according to Q4 expectations around EUR weakness.