Here is the EURUSD Fundamental Analysis of 21 November, 2019. Waning trade optimism will hopefully keep the EUR on the defensive. The ECB minutes are possible to show growing opposition to the latest stimulus package.
21 November 2019, AtoZMarkets – EURUSD is looking heavy ahead of the minutes of the European Central Bank’s (ECB) October policy meeting. Traders expect to show the members stand divided on which course to take.
EURUSD Fundamental Analysis – 21 November 2019
The decline in trade optimism may keep the euro on the defensive. However, the ECB’s minutes should show increasing opposition to the latest stimulus package.
The EURUSD looks forward to the minutes of the October monetary policy meeting of the European Central Bank (ECB). It should show members that they divided on the way forward.
The currency pair traded a bearish hammer candle on Wednesday. That indicates that the recent lows rebound below 1.10 has flagged and warned an imminent downward movement. A bearish reversal will, however, confirmed if the pair closes below the 1.1053 low on Thursday. On the other hand, a closing price above 1.1081 would invalidate the bearish hammer and signal recovery.
Waning Trade Optimism
Markets have become risk-averse in Asia, with reports indicating that the first phase of the US-China trade deal could slip into next year. Traders also worried that new political tensions between the United States and China would complicate things on the trade front.
Note that China has warned against retaliation for the US Senate’s decision to pass a law to protect human rights in Hong Kong. The decline in trade optimism may not bode well for the EURUSD. After all, the German economy, the manufacturing engine of the eurozone, has been struck in the last 12 months, thanks to Sino-US trade tensions. A bearish closing seems likely.
Focus On ECB Minutes
While the European Central Bank (ECB) exceeds the limits of monetary easing, attention is turning to fiscal policy. The euro area (EA) has a potential fiscal margin of 2.0% of GDP. “ “The potential fiscal space is calculated using a narrow criterion, based solely on the EA budget deficit. That is also unlikely to materialize as a rule-based fiscal policy restricts the growth of the public spending path.” “The hope of a large-scale fiscal boot for the EA will probably disappoint. And we estimate that an expansion closer to 0.25 to 0.5% of GDP in 2020 is more likely.”
“We need to review the current rules and focus more on medium-term policymaking.” “That will leave an over-on us on the ECB to support reflation. The monetary policy framework needs to be reviewed, especially in light of the considerable divisions that have emerged during the last easing.”
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