EUR/USD forecast for July 2020


US dollar forecast for July 2020

In July, the Scandinavian currencies should perform the best, the EUR/USD pair may start consolidation

Although the uptrend of the US stock indexes has slowed down, the bet on the risky assets in June, based on the statistical analysis with fundamental components, has been winning. The euro to the dollar has strengthened by more than 1%, the CAD has been 0.7% up, the AUD has increased by 2.9%. The entire picture has been spoiled a bit by the pound’s loss of 0.5% versus the greenback and by the Swiss franc drop against the euro by 0.1%. However, the research of the seasonal regularities of G10 performance in Forex has been generally an effective investment strategy in June. So, it makes sense to study the changes in Forex rates in July. 

The best performers in July were Scandinavian currencies. The Swedish krona closed in the green zone 25 times out of 45, the Norwegian krone rose in 24 cases out of 45. The previous beneficiaries, the AUD and the CAD, were among the outsiders in July.

Periods of rise and fall 

LiteForex: EUR/USD forecast for July 2020

Source: BoE, LiteForex analysis 

The study of averages and medians shows that the European currencies were strong in July, while commodity currencies were often pressed down. If this seasonal pattern repeats in 2020, the oil bulls will find it much more difficult to draw the Brent and the WTI up than it has been before. This may result from the escalation of the US-China trade war or the second wave of the pandemic.

Averages and Medians  

LiteForex: EUR/USD forecast for July 2020

Source: BoE, LiteForex analysis 

In favorable periods, the Scandinavian currencies were 2.3%-2.4% up on average. During the bear periods, the CAD and the AUD were down by 1.5% and 2.4% on average.

Dynamics of currencies in the periods of rise and fall  

LiteForex: EUR/USD forecast for July 2020

Source: BoE, LiteForex analysis 

The growth of the two Scandinavian currencies in sync looks rather surprising amid their general divergence in 2020. The Norwegian krone is a G10 outsider, it has been 11% down since the year’s start, which resulted from a sharp interest rate cut from 1.5% to zero to manage the recession as the negative fallout of the pandemic. Unlike Norway, Sweden prefers to hike interest rates, rather than to lower them. The Riksbank backs away from negative rates, which makes it different from other central banks. Japan, the euro area, and Switzerland still hold negative interest rates, while the USA and the UK discuss such a possibility. After all, Sweden presents different approaches to other global problems, including COVID-19.

I hope for the better, so I bet on the AUD/USD longs on the price fall and USD/CAD shorts on the price rise. The factor of the Riksbank’s monetary policy tightening has been mostly traded. However, the gradual recovery of the Norwegian economy and the positive changes in the oil market in the March-June period may be the reasons to sell the USD/NOK and the EUR/NOK. I expect the EUR/USD to consolidate in the range of 1.11-1.14 in July. This is because the US stocks are stabilizing, and neither the euro nor the U.S. dollar had previously strong seasonal patterns in July. 

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Price chart of EURUSD in real time mode

Forex in July: Vikings are on the warpath

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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