EUR/USD Forecast: ECB tensions keep the euro above support, everything else points down

• EUR/USD has been under pressure amid coronavirus concerns. 
• Speculation ahead of the ECB decision and US politics are eyed.
• Wednesday's four-hour chart is showing that critical support is in danger.

Hold that shot – the road to a coronavirus vaccine hit a road bump and that is adding to pressure on EUR/USD. AstraZeneca and the University of Oxford have halted their Phase 3 trial of a coronavirus candidate after one person fell ill after receiving the shot.

While there are several other advanced immunization projects – and it is unclear if the vaccine and that patient's spinal cord inflammation are related – markets found another reason to worry. The safe-haven dollar is on the rise. 

On the other hand, the greenback's rise against the euro is more limited – and that can be attributed to tensions ahead of the European Central Bank's decision on Thursday. The ECB is set to leave its policy unchanged but publishes new forecasts for growth and inflation. On the other hand, the economy has suffered a less significant hit than previously estimated. On the other hand, coronavirus cases are rising – especially in Spain and in France – casting a shadow over the recovery. 

Source: FT

Another factor to consider is the bank's stance on exchange rates. Philip Lane, Chief Economist with the ECB, said that he is "watching" the value of the euro. Will ECB President Christine Lagarde also comment about the common currency? Tension is keeping euro/dollar within a limited range. 

If the ECB comes and goes without rocking the boat, EUR/USD has more reasons to fall. Tensions between the UK and the EU are rising as Britain may push forward a bill that violated the Withdrawal Agreement, adding fuel to the fire of already deadlocked talks on future relations. While the pound is suffering the brunt of this breakdown in relations, the euro may also be affected. 

The greenback has more room to gain while Democrats and Republicans entrench themselves in their positions. The ruling party prefers a small relief bill – partially emboldened by the upbeat jobs report – while Democrats insist on providing a multi-trillion dollar package.  

Overall, there are several adverse factors for EUR/USD, with tension toward the ECB preventing a greater fall. 

EUR/USD Technical Analysis

Euro/dollar is trading above the critical 1.1750 level which was a slow point in mid-August and also in early September. Falling below that line would send it to the lowest in nearly a month. It is followed by 1.17, a stubborn support line from earlier last month, and then by 1.1625 and 1.1540. 

Immediate resistance is at 1.1785, the daily high, and at around 1.1805 – where the broken uptrend support line awaits. The next line to watch is 1.1860, which capped it earlier this month.

The fall below the trendline is a bearish development, joined by downside momentum on the four-hour chart and the drop below the 200 Simple Moving Average. The Relative Strength Index is still above 30 – outside oversold conditions, thus allowing for more falls. 

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