EUR/USD rally pauses as Danske Bank ups its target to 1.1815

EUR/USD rally pauses as Danske Bank ups its target to 1.1815
Written by:
Crispus Nyaga
28th July, 15:32
  • The EUR/USD pair declined slightly as investors reacted to the second wave fears in Europe.
  • The pair also declined because of the overall stronger US dollar today.
  • Analysts at Danske Bank upgraded their EUR/USD target to 1.18500 from 1.1500

The EUR/USD pair is down by 0.25% as investors react to the overall stronger US dollar and the rising number of coronavirus cases in Spain. The pair is trading at 1.1722, which is lower than yesterday’s high of 1.1780 and Danske Bank’s target of 1.1815.

EUR/USD falls on second wave fears

Euro falls on fears of a second wave

The euro declined against most of its peer currencies, including sterling, Swedish krona, and Canadian dollar. The so-called euro index, which measures its strength against that of peer currencies, declined by 0.55%.

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A key concern for the EUR/USD pair is that the number of coronavirus cases in some European countries has started to rise. Health officials in Spain reported more than 2,100 cases yesterday. They had reported more than 10,000 new cases in the previous three days combined.

These numbers are significantly higher than the less than 500 that the officials were reporting in the past few weeks. In total, Spain has reported more than 325,000 new cases and more than 28,000 deaths.

Spain is not alone. Other countries like Germany, Belgium, and France have recently reported new cases. As a result, countries have started issuing travel restrictions to prevent the disease from spreading. In a statement today, Boris Johnson appeared to confirm this. He said:

“Let’s be absolutely clear about what’s happening in Europe, amongst some of our European friends: I’m afraid you are starting to see, in some places, the signs of a second wave of the pandemic.”

The second wave of the virus risks tempering the Eurozone’s recovery process. In recent weeks, data such as retail sales, manufacturing PMIs, and German business confidence have shown that the region is recovering.

Danske Bank ups its EUR/USD target

Two weeks ago, we wrote that analysts at Danske Bank had upgraded their target for the EUR/USD to 1.1500. Well, the pair crossed that level on Tuesday last week. In a note published today, the bank said that it expects the pair to jump to 1.1815, which is the highest point since September 2018. The analysts said:

“On top of concerns about US growth, virus development and tensions with China, the tailwind for EUR/USD is the result of better news out of the euro area.”

At the same time, the pair’s decline is mostly because of the strong US dollar. The greenback is up against most currencies today as traders wait for the Fed interest rate decision.

EUR/USD technical forecast

EUR/USD technical forecast

The EUR/USD pair is trading at 1.1722, which is slightly below yesterday’s high of 1.1780. On the daily chart, the price is significantly below the 50-day and 100-day exponential moving averages. Also, the RSI remains at the highest level since June 4. Therefore, I expect that the pair will continue rising as bulls attempt to test the Danske Bank’s target at 1.1815.

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