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  • EUR/USD is on the rise with US stock futures flashing red. 
  • Analysts expect the single currency to slide to 1.05 in the coming months. 
  • Risk reset looks likely and could weigh over the safe haven EUR.

The single currency is looking to regain altitude lost on Tuesday with EUR/USD trading better bid near 1.1030 ahead of the London open. 

The currency pair fell by 1.64% from 1.1180 to 1.0996 on Tuesday to confirm the biggest single-day percentage loss since June 14, 2018. Back then, the pair had dropped by 1.91%. 

The safe-haven euro was offered as the US stocks rallied, possibly on the back of US fiscal stimulus talks. Markets also offered the common currency on the back of the disappointing German Zew survey, which showed that investor confidence fell to its lowest level since the financial crisis. 

Deeper losses ahead?

EUR/USD could suffer deeper losses in the near term as the Eurozone economy appears on track to enter a recession. “We would not be surprised if the pair tested 1.05 in the coming months,” Kathy Lien from BK Asset Management noted. 

Eurozone’s powerhouse Germany has closed borders, schools, public spaces, and non-essential shops. As a result, the ongoing deterioration in the economy could pick up the pace in the near term, adding to bearish pressures around the EUR.

As for the next 24 hours, the focus remains on the broader market sentiment. If the global equities take a beating, the common currency will likely find buyers. At press time, the futures on the S&P 500 are reporting a 3 percent drop. 

The odds, however, appear stacked in favor of a risk reset, as the Federal Reserve and other major central banks have recently cut rates to soften the economic blow of the coronavirus pandemic. The Fed has also launched a quantitative easing program worth $700 billion. Other major central banks have also done their bit by cutting rates. 

Meanwhile, the Trump administration said on Tuesday that it is planning to send checks directly to Americans as part of a $1 trillion stimulus program. 

If the stocks cheer the massive monetary and fiscal stimulus, EUR/USD will likely revisit and possibly break below Tuesday’s low of 1.0955. 

Technical levels