Focus (Germany): dollar end? Is the Euro in times of crisis has become a “safe haven”

When “coronaries” has just begun, the Euro rate went down — out of fear that a pandemic might entail another existential crisis of the monetary Union. However, the single currency is now gaining momentum, while the US dollar is losing value. Experts do believe that the Euro is intended to be a “safe haven”.

Eurosceptics, perhaps, could not think of a better reason to declare the imminent collapse of the common currency area than the one that gave them the coronavirus pandemic. Their scenario seemed almost perfect: how different countries are able to successfully coordinate actions to combat the crisis recognizes no borders? And, most importantly, who is going to pay for all this?

These themes have influenced not only the debate in Europe and the single currency. Euro in the beginning of the year fell markedly, then shot up but only to collapse in March with a 52-week high of 1,1496 dollar to 52-week low 1,0635 dollar.

However, down to the bottom, the European currency began a new ascent. Currently, the Euro is worth 1,1316 of the dollar, which again is significantly closer to 52-week high than to the low. Thus, the dollar is worth 0,8838 euros. With the recent low, the European currency rose by 6.4%. In other words, the euros in the last three months has been remarkably stable. Forex traders who made a bet on the “European”, can deservedly enjoy the profits.

The Euro passed the “Golden cross”

It is possible that the rate will continue to grow. This, on the one hand, indicate technical indicators and other assessment experts. The economic news Agency Bloomberg recently reported that the Euro-dollar exchange rate close to cross the 200-week “moving average” and to consolidate above it. If it really happens, it will be a signal in favor of further strengthening of the European currency.

This, according to experts Bloomberg, would be an additional bullish signal for the Euro. So, the Euro in mid-may have crossed the 200-day “moving average”, and in mid-June, this was followed by the so-called “Golden cross”, when the shorter moving average crosses the longer term: in this case, the 50-day “average” has crossed the 200-day. It is a signal of the short – and even medium-term positive trend.

According to analysts Bloomberg, this Euro rally is investors ‘ confidence in the correctness of the crisis management of European authorities. This opinion is shared by experts of the currency market of Commerzbank. “If we step back and look at the graph in the longer term, it can be assumed that, (…) in the coming months we can expect a stabilization of the Euro”, — stated in their recent post.

A compromise on the restoration of the EU will eliminate internal fragmentation

Experts, however, noticed that the market may again be averse risk, and investors will react to this long-known way: rush to “safe haven” is the us dollar. “Crisis hotbeds, of course, enough around the world,” admitted analysts at Commerzbank. However, they are confident in favorable prospects for the Euro: “it is Likely that in the coming months when the EU presiding Germany, a compromise is found regarding the plan for rebuilding the European Union.”

This, according to experts, would remove the internal split within the ranks of the Union and aggravating factor for the single currency. Of course, we are not talking about automatic overcoming of all the negative factors associated with the pandemic. Nevertheless, the EU economy through market packages, coupled with the measures taken by the European Central Bank, “gradually recover from the deep recession.”

At the same time in the US ahead of presidential elections there is the ever-growing schism. Since the Federal reserve system (the fed) after a series of increases in the key rate again reduced it to almost zero, the dollar is not getting support even from this side: “the Interest benefits of the dollar against the Euro remained purely marginal and cannot be considered a serious argument in its favor”.

The pandemic rages in the US stronger than before

Another important factor, according to experts, pandemic is one of the coronavirus that causes more and more to doubt the competence of American leadership. “Added to this, apparently, is the uncontrolled development of the pandemic in the United States, which have shaken citizens ‘trust in the ability of the authorities and of the health system to respond correctly”, — analysts say.

I must say that lately in the US once again sharply increased the number of victims of coronavirus. Since the start of the pandemic was about 3.3 million deaths, making the United States the epicenter of the pandemic. They account for approximately 25% of all deaths in the world caused by covid-19. For the last week in the United States registered more than 50 thousand deaths every day.

In some States (e.g., Arizona, Texas and Florida) pandemic after the first of the steps to ease the restrictive measures raged stronger than before. So, in Arizona, according to media reports, in early July, was was the seven-day average, the corresponding figures of the European Union. But the population of the EU is 60 times the population of Arizona.

Euro instead of the dollar — the new “safe haven”?

All of this speaks not in favor of the dollar — and thus in favor of the Euro. According to Bloomberg, his own dollar index has been steadily declining for three months in a row. This index measures the movements of the American currency against a basket of other currencies, and the basket a third of the Euro. Over the past year, such depreciation of the dollar has not been observed, recognized Bloomberg.

In addition, traders are already offering additional margin, betting on the Euro against the dollar. This is evidenced by the price of the relevant options. So what is the market trend on the strengthening of the Euro against the dollar. Commerzbank analysts came to a similar conclusion: “Possibly before the end of the year Euro will become the new “safe Harbor””.