- EUR/USD is down more than 1% this week.
- The pair last suffered a 1% weekly drop in May.
- Coronavirus resurgence to keep euro under pressure in the near-term.
- Dollar to benefit from the US fiscal impasse, election uncertainty.
EUR/USD is on track to register its first 1% weekly decline since the first week of May.
The pair is currently trading at 1.1665, representing a 1.46% decline on a week-to-date basis, having reached a two-month low of 1.1626 on Thursday.
The single currency picked up a bid after IFO data showed that Germany’s business morale improved for the fifth month in a row in September.
Bias remains bearish
While the pair has regained some poise, the path of least resistance is still to the downside, according to BK Asset Management’s Kathy Lien.
That’s because the Eurozone is facing a second wave of coronavirus. According to BloombergQuint, France and the UK have reported a record number of new coronavirus cases in the past 24 hours. “At this rate, there’s no question that further restrictions are on their way,” Lien noted in her daily analysis.
New lockdown restrictions could cause more significant economic damage. “There is a “big risk of a double-dip” in the fourth quarter, Chris Williamson, the chief business economist at IHS Markit, told CNBC’s “Street Signs” earlier this week.
As such, traders are unlikely to put a strong bid under the euro any time soon. Meanwhile, the dollar could continue to draw haven bids, courtesy of the lack of additional US fiscal stimulus, and the US election uncertainty.
As per technical charts, the bias will remain bearish as long as the pair is trading below the now descending 10-day simple moving average (SMA), currently at 1.1768.
The Eurozone data calendar is light on Friday. Across the pond, the US Durable Goods Orders figure for August is scheduled for release at 12:30 GMT. BK Asset Management’s Lien does not expect the Durable Goods Orders to impact markets significantly. “Currency traders should take cues from equities and Treasuries,” Lien noted.