- EUR/USD’s daily chart indicates scope for deeper losses.
- Concerns about Eurozone’s vaccine delivery and economic growth weigh over the EUR.
- A better-than-expected Eurozone CPI is needed to save the day for the bulls.
EUR/USD looks weak, having breached crucial Fibonacci (Fib) retracement support amid speculation that Eurozone’s vaccine response has been slower than the US and UK.
The pair closed Tuesday below 1.2064 – the 38.32% Fib retracement of the rally from 1.1602 to 1.2349. That’s a significant negative signal, according to Reuters. EUR/USD has also taken out the head-and-shoulders neckline support at 1.2349, confirming a bullish-to-bearish trend change.
EUR/USD: Put options are again drawing bids; risk reversal shows
The single currency is on the defensive, with coronavirus concerns overshadowing the risk-on action in stocks.
“One of the Eurozone’s greatest challenges is their slow vaccine rollout,” BK Asset Management’s Kathy Lien noted in her daily analysis, adding that while Germany and France have vaccinated more people than the US, Eurozone’s export controls and greater supply issues could create long-term problems.
Besides, investors seem worried that the ongoing economically painful lockdown restrictions could remain in place for longer, as the number of coronavirus cases continues to rise. Lastly, the dollar shorts remained extended, and the pair remains vulnerable to a sudden unwinding of bearish bets on the US dollar.
The bulls, therefore, need a big beat on the preliminary Eurozone Consumer Price Index (CPI) data to keep the pair from falling further. The data due at 10:00 GMT is expected to show the cost of living rose by 0.5% year-on-year in January following December’s 0.3% decline.
EUR/USD Price Analysis: Daily chart shows a head-and-shoulders breakdown