• EUR/USD has reacted to upbeat PMIs with a bounce from four-month lows.
  • Dollar strength and virus issues will likely keep the currency pair depressed.
  • Wednesday's four-hour chart is pointing to new falls.

A gasp for air before the next dive? That may be the picture emerging for EUR/USD as it benefits from upbeat figures but continues facing dark clouds. 

Markit's preliminary Purchasing Managers' Indexes for March have smashed estimates, showing that businesses are upbeat about the upcoming recovery. The composite eurozone PMI topped 50 for the first time since September – finally pointing to growth. However, that may be a rosy view.

Germany, France and Italy have recently extended or reimposed restrictions due to a new wave of COVID-19 infections, hospitalizations and deaths. Citizens are growingly frustrated with lockdowns and with the EU's handling of vaccines. In turn, Brussels is trying to turn this anger toward pharmaceutical firms, mostly AstraZeneca, and its host country, the UK.

Officials at the bloc are mulling new curbs on exports of jabs and also raw materials, potentially resulting in fewer doses to go around. While talks with Britain may end in compromise, the picture is far from positive for the eurozone and the common currency. 

Europe is also lagging in its economic response – and now with a fresh emphasis coming to a new American infrastructure program. According to reports, President Joe Biden's administration is working on a $3 trillion plan that would be presented in the next few days.

Treasury Secretary Janet Yellen remained mum on the topic in her testimony to Congress but may shed more light on it in Wednesday's appearance. Markets are watching the components of this program, closely watching its funding. Democrats may push for tax hikes, which dampen the market mood and push the safe-haven dollar higher. Moreover, the greenback is rising despite lower yields. Raising taxes means less debt issuance, and thus lower returns on Treasuries. 

Why the dollar is rising while yields are falling, blame it on the taxman

Another factor to watch on Wednesday is America's Durable Goods Orders report for February, which is set to show an increase in investment. 

US Durable Goods February Preview: Consumption to reflect labor market recovery

All in all, EUR/USD has more room to fall than to rise.

EUR/USD Technical Analysis

Euro/dollar has dropped below the previous 2021 trough of 1.1836, hitting a low of 1.1812 before bouncing. With momentum remaining to the downside on the four-hour chart and the Relative Strength Index holding above 30, bears remain in control. 

Immediate support awaits at 1.1812, followed by 1.1750 and 1.1690 last seen in November. 

Resistance is at 1.1875, a cushion from recent days, followed by 1.1910 and 1.1950. 

Five factors moving the US dollar in 2021 and not necessarily to the downside

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