EUR/USD: Growing Covid-19 Cases could weigh over the single currency

• EUR/USD ticks higher with the S&P 500, ignores weakness in APAC stocks. 
• Big gains look unlikely as virus resurgence sours risk appetite. 
• ECB Villeroy de Galhau says monetary policy needs to remain loose to achieve price target. 

While EUR/USD is flashing green at press time, the upside looks limited as the rising number of coronavirus cases are likely to weigh over the European equities. 

At press time, the pair is trading at 1.1240, representing a 0.20% gain on the day. The dollar is trading weak, possibly on the back encouraging news related to coronavirus vaccine and the resulting uptick in the US stock futures. The S&P 500 futures are currently reporting 0.10% gains, having declined by more than 0.5% early Monday. 

However, China news has failed to put a bid under the Asian equities and the European stock futures. As of writing, major Asian indices like Nikkei, S&P/ASX 200, Hang Seng are down at least 1% each. Stocks in China, too, are reporting a 0.7% decline. Meanwhile, futures tied to France’s CAC index and Germany’s DAX are down 0.4% and 0.10%, respectively. 

The nervous mood could be associated with the fears of the second wave of the virus outbreak. The number of cases across the globe rose above 10 million over the weekend. The US posted record virus cases for the third straight day on Saturday and Tokyo recorded 60 new cases on Sunday, the highest daily tally since May 4. 

With virus resurgence souring risk appetite, the odds appear stacked against a sustained uptick in EUR/USD. In addition, dovish comments made by the European Central Bank policymaker Francois Villeroy de Galhau on Sunday could cap gains in the common currency. The policymaker said that the monetary policy need to remain loose until the central bank’s inflation target of 2% is clearly in sight. 

On the data front, Eurozone economic and business sentiment indices are scheduled for release at 09:00 GMT on Monday, following which the focus would shift to the German Consumer Price Index (MoM) (Jun), due at 12:00 GMT. Across the pond, the US housing data and regional Fed manufacturing indices are due for release. 

Technical levels