EUR/USD Forecast: Dark economic clouds overshadow coronavirus optimism, technicals pointing down

Light at the end of the tunnel? All of the eurozone's four large countries have reported encouraging COVID-19 statistics. However, the old continent faces a slow economic recovery and disagreements between leaders cast a dark cloud.

Germany, the largest economy, has reported the fourth consecutive drop in the daily rate of infections, rising by 3,677 or 4%, lower than in previous days. The death has risen by 92 to 1,434. France, the second-largest country, has confirmed 357 mortalities compared with 441 beforehand. 

Italy, the third-largest economy and the country hardest hit by the pandemic, registered only 525 deaths on Sunday, the slowest since March 19. Spain, the fourth-largest economy and the country with the highest number of infections in the old continent, announced 674 new mortalities, the most depressed since March 26. 

However, while the recent trends are unified, leaders remain at loggerheads over how to mitigate the economic fallout. Pedro Sánchez, Spain's Prime Minister, has written that the survival of the European Union rests on the response to the crisis. Sánchez and his peers in Italy and France have demanded to mutualize the debt – issuing "coronabonds." However, Germany refuses to support such a proposal and insists that hard-hit countries could use existing bailout mechanisms. 

Another economic concern is the slow exit from the lockdowns. Spain extended its state of emergency through April 26 and clarified that the economy will not open up at once. Italy is mulling easing restrictions in mid-May. Health officials fear that a return to normal may trigger a second wave of infections. Without widespread testing of people sick with COVID-19 – or carrying antibodies – every step will be gradual. 

The Sentix Investor Confidence for April is forecast to decline. 

Safety of the US dollar

Another reason to doubt EUR/USD's recovery comes from the other side of the pond. The US economy is also struggling and the dollar benefits from safe-haven flows. US surgeon general Jerome Adams said that the country is facing a "Pearl Harbor" moment in the upcoming week, which may be the peak. 

US President Donald Trump has expressed some optimism amid stabilizing figures in New York and as he announced the buying of hydroxychloroquine – an anti-malaria drug that has yet to prove efficient against COVID-19.

The world's largest economy has lost 701,000 jobs in March, far worse than expected, and while the Non-Farm Payrolls surveys have been taken in the middle of the month – before the latest lockdowns. The drop in America's participation rate is an indication that fewer people are looking for jobs. 

 Later in the day, coronavirus headlines from both Europea and the US are of interest. 

EUR/USD Technical Analysis

Bears remain in control, with momentum on the four-hour chart pointing to the downside and the currency pair trades below the 50, 100, and 200 Simple Moving Averages. Moreover, the Relative Strength Index is above 30, outside oversold conditions. 

Support awaits at around 1.0770, which is Friday's low. The next support line is only at 1.0640, the 2020 trough. Further down, 1.0580 and 1.05 await EUR/USD. 

Some resistance awaits at 1.0840, the daily high, and it is followed by 1.09, which was a cushion last week. The next level to watch is 1.0970, a resistance line from late March, and then 1.1050, which held euro/dollar down beforehand. 

More: Explained: What indicators matter in coronavirus times