EUR/USD Forecast: Coronabonds clash, limited lockdown lifting, and strong resistance all point down

• EUR/USD has been under pressure as the eurozone grapples with coronavirus exit strategies.
• Tension is mounting towards the EU Summit later this week.
• Monday's four-hour chart is pointing to further losses.

Coronabonds – which some see as European solidarity and others as transfers from hard-working to profligate countries – are dividing Europe and weighing on the common currency. Leaders will convene via video on Thursday, but countries are reiterating their positions early on Monday and already having an impact.

Italian Prime Minister Giuseppe Conte has repeated his call for sharing debt and said that Germany and the Netherlands – the latter behind vehemently against coronabonds – have to change. Spain suggested expanding the initial €500 billion aid package to €1.5 trillion. This approach is supported by Paolo Gentilloni, the European Commissioner for Economic and Financial Affairs, and former Italian PM. 

Both French President Emmanuel Macron and Spain's PM Pedro Sánchez have issued stark warnings about the future of the EU. 

Coronavirus cases and deaths have been on the decline across the continent, but the pace is somewhat slow, and lifting restrictions is cautious. Policymakers fear a second wave of infections and reinforcing restrictions that would deal a blow to confidence. The death toll across Europe has topped 100,000.

Germany – suffering only a limited outbreak – is easing some of the restrictions this week. France, which has also seen several encouraging days after devastating ones beforehand, will unveil a plan to reopen the economy. Mortalities in Italy are falling but remain somewhat stubborn in Milan. Spain's death toll plunged on Saturday, but this may be due to the "weekend effect." The eurozone's fourth-largest economy will let children leave their homes from April 27. 

Internal clashes and uncertainty about exit strategies are also engulfing the US. While cases and deaths are on the decline – especially in hard-hit New York – governors and the Federal government are suffering frictions.

One day after President Donald Trump said that removing shelter-in-place orders is up to governors, he encouraged protests against the lockdowns. He also continued blaming the World Health Organization – despite receiving timely warnings about the coronavirus from Americans in the WHO. He also attacked China. Authorities in Beijing initially covered up the disease while Trump played it down. 

The good news from Washington is that Republicans and Democrats are nearing an agreement on further aid to individuals and businesses, following the $2.2 trillion packages. If they announce another substantial stimulus, the market mood will improve, weighing on the dollar and allowing the euro to recover. 

While investors may find the clashes fascinating, the ongoing damage to the economy – from extending the shutdown or from a premature opening – is eyed. Countries are trying to ramp up standard testing for COVID-19, probes for antibodies – which are still not 100% reliable. Other measures are enhancing contract tracing capabilities and preparing hospitals to absorb new patients should it be necessary. 

The calendar is void of substantial releases on Monday but consists of forward-looking Purchasing Managers' Indexes and other significant publications later in the week.

EUR/USD Technical Analysis

Euro/dollar has been trending lower since hitting a peak at 1.0995 last week. It fell below uptrend support and the 50 and 200 Simple Moving Averages on the four-hour chart. Downside momentum is picking up. All in all, bears are in the lead.

Support awaits at 1.0810, which was last week's low, and 1.0770, April's trough follows it. The next line is 1.0720, followed by the 1.0640, the 2020 low.

Robust resistance is at 1.0895, a high point on Friday, and also a support line last week. Further up, 1.0930 was a swing high in early April, ahead of 1.0995.