EUR/USD Forecast: Covid, US data and Fed tensions are set to keep bears in control

Recovery? Not so fast, and not now. It seems that every attempt by EUR/USD to recover is thwarted rapidly and the pressure will likely continue. The latest trigger for a risk-off mood that favors the dollar came from China – authorities are cracking down on tech firms. There are more reasons for the safe-haven currency to advance. 

COVID-19 cases continue rising in Europe, despite the old continent's catching-up with vaccinations. The upswing in infections is weighing on the euro and also on companies' sentiment in the eurozone's largest economy. The German IFO Business Climate missed estimates with 100.8 points. 

As a safe-haven currency, the dollar benefits from growing concerns – even if worries stem from the spread of the Delta covid variant in the Mississipi Delta and beyond. America's cases, hospitalizations and deaths continue rising, especially among the unvaccinated, but also elsewhere, while immunization efforts have stalled. 

The Federal Reserve will likely consider the virus in its meeting which kicks off on Tuesday. While the Fed is set to leave the door open to tapering its bond-buying scheme, recent signs of a slowdown join worries about covid and could result in a cautious message when Chair Jerome Powell meets the press on Wednesday. 

Apart from positioning ahead of the Fed, investors will also be watching Durable Goods Orders figures for June, which are forecast to show expansion in investment, but there are reasons to project it will miss estimates – like other statistics for last month. That could also boost the greenback.

Durable Goods Orders Preview: Why expectations could be too high, data useful for trading GDP

Another release of interest is the Conference Board's Consumer Confidence gauge for July. The downfall in the parallel University of Michigan survey halted a stock market rally several weeks ago. 

Overall, a rush to the safety of the dollar seems to be the name of the game – at least until the Fed decision. 

EUR/USD Technical Analysis

Euro/dollar has slipped below the 50 Simple Moving Average on the four-hour chart after failing to recapture the 100 SMA. Moreover, momentum has turned back to dhw downside after several sessions on the upside. Bears are looking stronger. 

Support awaits at the July low of 1.1750, followed by 1.1717 and 1.17, levels last seen early in the year. 

Resistance is at 1.1812, the daily high, followed by1.1830, 1.1850 and 1.1880, which all capped recovery attempts. 

See Analyzing inter-market correlations to see if reflation trade is coming to an end – July 2021