Is EUR Poised for a Perfect Storm?

Is EUR Poised for a Perfect Storm?

A bearish engulfing pattern appeared in the final weekly chart of October, indicating weak euro prices. Analysts suggest the euro is staging a perfect storm. I do agree the euro is facing a crisis of slump as several factors have been negative enough to push the currency into a new bear market.To get more news about WikiFX, you can visit wikifx.com official website.

  In terms of external factors, the uncertainties in the election and the failure of the White House and the House of Representatives in reaching a relief deal have brought about negative impacts, which weighed on US stocks and sent a sharp rally to the DXY. As a result, the euro bore the brunt of the strong greenback.In terms of internal factors, the fatal hit to the euro first attributes to the second wave of the pandemic across Europe, which urges countries such as Germany and France to impose emergency lockdowns, resulting in sharp economic losses. The economic data is estimated to be even worse in the future. Besides, although the European Central Bank (ECB) kept interest rates unchanged last week, all members of the ECB had agreed that it was necessary to take action at the next rate, said President Lagarde. In the wake of such a statement, the euro prices plunged to a four-week low.

  The next ECB meeting is scheduled for December 10. In this regard, I believe the ECB will not only take action at the next meeting but even undertake more quantitative-easing measures. The ECB may take early action in response to either the bloc‘s pandemic or the economic situation, which put continued selling pressure on the euro. If this week’s US stocks fall steeply because of the turmoil in the country, the euro will be further punished.   Notably, the latest US GDP released last week embraced the strongest rally in history, proving there is a big difference in the economic situation between the US and Europe. The Fed meeting is about to be held this Thursday in addition to the presidential election this week. There seems to be no need nor space for the Fed to take dovish measures amid the strong economic growth. With the election and the Fed's meeting on the way, the DXY has a great chance to climb further this week, a heavier pressure on the euro. Thus the euro is poised for a perfect storm no matter in the short, medium or long term.