EUR/USD: Is Europe’s coronavirus advantage set to trigger further gains?

  • EUR/USD has been advancing as investors shrug off rising US coronavirus cases.
  • Europe’s relative success with curbing COVID-10, inflation figures, and other developments are eyed.
  • Monday’s four-hour chart is painting an improving picture for the pair.

Coronavirus is raging in America – Texas’ positive test rate has surged above 14%, Arizona and Georgia have reported a record number of cases, and Florida is not far behind. California, the largest and richest state, will be closing bars and in general – US cases topped 2.5 million.

Vice President Mike Pence seemed to have changed his mind on wearing face masks, saying on Sunday it is “just a good idea” after refusing to comment on the matter on Friday. President Donald Trump has yet to endorse the cheap method of preventing the spread of the disease. Without a personal example, his supporters may continue spreading it.

Bad news used to push the safe-haven dollar higher but after Friday’s greenback gains, the world’s reserve currency is on the back foot, also against the euro. Is it Europe’s advantage in fighting the disease? Flare-ups have been recorded in various places in the old continent, but the situation is well under control.

Per million, infections remain depressed in Europe’s four large countries while they are clearly rising in America.

Source: Financial Times

A more down-to-earth explanation for EUR/USD’s advance is that markets have stabilized after Friday’s sell-off, allowing the greenback to retreat. The next moves mostly depend on a fresh wave of data due out in the European afternoon.

In the old continent, preliminary inflation figures from Germany for June carry expectations for a bounce after substantial falls beforehand. Spain’s Consumer Price Index surprised with an annual fall of 0.3% compared with -0.9% projected. Isabel Schnabel of the European Central Bank said that inflation could dip below 0%, potentially triggering more monetary support.

On the fiscal front, leaders are gearing up toward another discussion about the EU Fund, after failing to agree beforehand. Emmanuel Macron – France’s President and a proponent of the ambitious plan – suffered a defeat in local elections in his country, somewhat weakening his hand.

The European Commission is set to release its new travel guidance on Monday or on Tuesday, probably excluding visitors from the US amid the second wave. That would add to trans-Atlantic tensions, following both sides’ inability to agree on several trade issues.

Later in the day, US Pending Home Sales are forecast to show a bounce in May after a downfall in April, following in the footsteps of retail sales and durable goods orders.

Overall, there are several topics moving the euro/dollar, yet coronavirus is by far the most significant one.

EUR/USD Technical Analysis

The world’s most popular currency pair has bounced off the uptrend support line once again, strengthening its importance and serving as a bullish sign. EUR/USD also advanced above the 50 Simple Moving Average on the four-hour chart. On the other hand, momentum remains to the downside.

The picture is improving but euro/dollar is not out of the woods.

Resistance awaits at 1.1290, which was a swing high in mid-June. It is followed by 1.1350, a double-top. 1.1385 and 1.1420 are next.

Immediate support is at 1.1250, which is still fought over and was a swing high last week. It is followed by 1.1190, which cushioned the currency pair in recent days. The next lines to watch are 1.1175 and 1.1075.

More What to watch out for and why the dollar is king in the US coronavirus comeback

Get the 5 most predictable currency pairs

About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.