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Revival for the euro: close recovery?

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Last week was extremely unfavorable for the European currency. The single currency steadily declined, almost reaching the bottom. According to analysts, it will be difficult for the euro to recover and long enough, but nothing is impossible for the stubborn and persistent, and the single currency is proof of this.

The beginning of this week promises a relative calm for the euro. However, the single currency looks vulnerable amid not-so-good news about the spread of the Chinese coronavirus. Experts fear that the fragile balance that appeared in the EUR/USD pair at the end of last week will be upset.

Recall that the rapid rise in the index of business activity in the manufacturing sector in Germany became the springboard for the euro last Friday, February 21. The currency jumped to 47.8 points, although experts expected an increase not higher than 45 points. Six months ago, the German economy showed a significant recession amid a sharp reduction in orders from China, and now the tense situation with coronavirus has been added to them.

Another traumatic factor for the euro was the growing strengthening of the dollar. The greenback gain was especially noticeable in the EUR/USD pair. Last Friday, the pair experienced not the best of times, then dropping to 1.0800–1.0801, then rising again.

The EUR/USD pair felt much more energetic on Tuesday, February 25, as it traded in the range of 1.0851–1.0852 in the first half of the day. Analysts believe that the pair will move to new heights in the near future.

However, not all experts are optimistic about the single currency. Leading strategists at Societe Generale SA Bank believe that pressure on the euro will increase, and it will sink even lower. They worsened the forecast for the single currency from the previous $1.2000 to $1.1600. According to analysts, this month the European currency has become one of the weakest key currencies, and in the short term we should not hope for its active growth.

Currently, the euro is trying to grow in the hope of stimulating the economy by the US Federal Reserve, but this position seems a bit naive. According to experts, the US regulator is in no hurry to help the European economy, compensating for the decline in production in China due to the coronavirus. Mitsubishi UFJ bank experts emphasize that the latest news creates an extremely negative background for the single European currency. The bank believes that the current recovery of the EUR/USD pair resembles a normal correction. Analysts recommend closely monitoring the support level of 1.0750, a breakthrough of which will signal the resumption of sales of the euro and will open the way to the levels of 1,0500-1,0400.

According to experts, the recovery process of the euro will bear fruit. However, you should not count on a quick rise and bewildering records, experts warn. In the situation with the European currency, gradualness and the ability to gain a foothold in the gained positions, rather than to act sporadically, is important, analysts said.

The material has been provided by InstaForex Company - www.instaforex.com