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01.10.2019 10:59 AM
Knockout for the euro: the main thing is not to get sink to the bottom

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The state of the single European currency is like a boxer who fought desperately to the last, but received a sudden blow, knocking him down. The euro sank sharply after news of a decline in the German economic growth forecast for 2019, and its recovery may be delayed, experts believed.

Losses of the "European" after Reuters information about the deterioration of the German economic growth forecast for the current year amounted to 0.50%, to $ 1.0886. We can recall that the largest economic institutions expect only a slight increase from the locomotive of the European economy. In 2019, according to revised data, a growth of 0.5% is forecasted compared to the previous level of 0.8% recorded in April. Next year, the German economy is expected to rise by 1.1%, which is worse than the April forecast of 1.8%. Calculations for 2021, on the other hand, provide within 1.4% for economic growth in Germany.

The collapse of the single European currency also contributed to a number of reasons. These include a stronger US dollar, easing the Fed's monetary policy and the protracted trade conflict between Washington and Beijing. These factors that increase the demand for US currency have hit Europe hard. To date, the EUR / USD pair has reached a price bottom that has not been fixed for 28 months.

The beginning of October turned out to be difficult for the single European currency, due to the fact that the "European" is pressured by the burden of deteriorating statistical data over the past month. We can recall that in September, experts recorded a sharp decline in consumer prices in Germany. The data turned out to be worse than analysts expected. Now, the euro is "finished off" by the hopeless forecasts regarding the economic growth of Germany.

The currency market is dominated by bearish sentiment. Thus, many traders and investors consider the fall of the euro to an extremely low bar of $ 1,0500 inevitable. However, more optimistic market players do not believe in such a development. They rely on an impressive margin of safety of the German economy. Meanwhile, a strong Eurozone labor market is driving domestic demand growth and offsetting the negative effects of trade wars and a slowdown in the global economy, analysts say.

The statistics of past years, when the EUR / USD pair traditionally showed high rates in October, testify in favor of the euro. On the side of the "European" are the "bulls" who are ready to hold the defense and relying on weak statistics on the US labor market. They plan to gain a foothold at the previously noted support levels of $ 1.0875– $ 1.0885 and $ 1.0775– $ 1.0795.

Currently, the European currency is trading between $ 1.0886– $ 1.0888. Recall that the euro fell to this level after the news about the worsening forecast for the growth of the German economy. Now, the main thing for the "European" is not to stay at the bottom, but to find a way to push from it, experts are sure.

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Larisa Kolesnikova,
Analytical expert of InstaForex
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