- EUR/USD remained least volatile yesterday but posted some losses.
- The fourth wave of Covid can weigh on the pair.
- Brexit concerns are hovering on the pair.
- The technical picture is bearish for the EUR/USD.
The EUR/USD pair traded calmly on Wednesday with the least volatility. However, Dollar’s dominance could be clearly seen in the market. The pair was on the backfoot in anticipation of Fed meeting minutes. But the meeting minutes could not surprise the market participants, and the pair had already discounted the impact of Fed’s hawkishness. Fed is not worried about inflation anymore and expects further improvement in the US labor market.
COVID hitting EUR/USD
The new virus strain has outbursts in the UK and Europe, which creates a troublesome situation as the global economy may slow down its pace of recovery. As a result, we may see a deterioration in the risk sentiment amid the fourth wave of the pandemic. Furthermore, doctors in Israel have said that the Pfizer vaccine is only 60% effective against the Indian virus strain.
The market sees less risk appetite, and eventually, Euro as a risk asset can turn lower against the US Dollar.
Brexit concerns
It is also absolutely unclear how all the proceedings between the European Union and Great Britain will end. At the moment, it is clear that Brussels clearly does not want to escalate the situation. It so far confines itself to threats, offering London to sit down at the negotiating table and stop unilaterally changing the clauses of the agreements already signed. However, any patience sooner or later comes to an end. It is unlikely that the European Union will watch for a long time how London changes the “Northern Ireland Protocol” because it considers it ineffective.
EUR/USD technical view: What’s next?
The EUR/USD broke below the key 1.1800 level yesterday and is now consolidating under the support area, which will now act as resistance. The 20, 50 and 200 SMAs on the 4-hour chart lie one above another, showing a strong bearish trend. Volume is also supporting a downside. However, still, the key is to watch the Dollar’s price action.
Support levels:
S1 – 1.1780
S2 – 1.1719
S3 – 1.1658
Resistance levels:
R1 – 1.1841
R2 – 1.1902
R3 – 1.1963
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Saqib Iqbal
