EUR/USD: Bulls have little to worry about, US political mess hits dollar

EUR/USD could be gearing for another move up after correcting with a fall of over 200 pips to 1.17. Mixed US data and political impasse plus updated coronavirus figures could, indeed, weigh on the dollar, FXStreet’s analyst Yohay Elam informs.

Key quotes

“Talks between Democrats and Republicans on the next relief package are stuck. Speaker of the House Nancy Pelosi does not expect progress this week and White House Chief of Staff Mark Meadows – a fiscal hawk – opposes surpassing $1 trillion in spending. The longer the impasse extends, the greater the damage to the US economy, potentially prompting the Fed to act. The pressure to add more monetary stimulus – such as pushing the yield curve lower – may grow. Depressing returns on US debt, may, in turn, weigh on the greenback.”

“Another factor weighing on the dollar is data – while the ISM Manufacturing Purchasing Managers’ Index beat expectations with 54.2 in July, the employment component remained well below 50 – implying more firing in the industrial sector. Factory Orders figures for June are awaited, while speculation ahead of Friday’s Non-Farm Payrolls is rising.” 

“The good news from America is the drop in new coronavirus statistics – yet that is likely due to the weekend effect. Tuesday’s figures may continue showing a flattening of the curve of the case, yet mortalities are set to bounce back above 1,000. In the old continent, several countries are experiencing flareups, but the situation seems under control.”