EUR/USD Forecast: Euro set to extend decline on covid fears, ECB uncertainty, dovish technicals


  • EUR/USD has remained pressured as the dollar has refused to decline despite a better market mood. 
  • Concerns about the Delta covid variant and uncertainty ahead of the ECB decision weigh on the euro. 
  • Wednesday's four-hour chart is showing bears are in full control.

Turnaround Tuesday? Maybe for markets, but for EUR/USD which barely experienced a dead-cat bounce and has hit a new 15-week low under 1.1755 at the time of writing. The greenback has been able to maintain its strength despite stocks' upswing – showing that it is more than a safe-haven currency.

Moreover, the greenback also seems to ignore the moves in bond markets. Returns on 10-year Treasuries have bounced off the lows and are hovering around 1.20% – the dollar is powering ahead regardless. 

What is going on? Tuesday's stocks bounce was probably temporary, a countertrend within a downtrend. COVID-19 cases continue climbing all over the world, threatening global recovery. That includes the US, where all 50 states have reported increases and where hospitalizations and deaths are also marching higher. The vaccination campaign remains stuck.

Source: NYT

Uncertainty is also the name of the game in Washington, where the Senate is set to hold an initial vote on a bipartisan infrastructure bill – but the details are still unclear. 

Concerns about future developments also weigh on the euro – first and foremost, Thursday's decision by the European Central Bank. The Frankfurt-based institution is convening for the first time after unveiling its strategic review – which allows inflation to hover around 2% and does not cap it at that level. 

The ECB's strategic dovish shift could be reflected in the new policy, which could weigh on the euro. Moreover, the bank is set to respond to rising coronavirus cases and their impact on Europe's recovery. 

See ECB Preview: Three reasons why Lagarde could hit the euro when it is down

Overall, uncertainty about covid, infrastructure and the ECB could continue pushing the dollar up and the euro down.

EUR/USD Technical Analysis

Euro/dollar has been setting lower highs and lower lows – yet remains outside oversold conditions on the four-hour chart. The Relative Strength Index (RSI) is above 30. Moreover, the currency pair trades below the 50, 100 and 200 Simple Moving Averages. Bears have not lost their grip.

Immediate support is at the fresh 1.1754 trough, the lowest since April. It is followed by 1.1740, which was a low point around that time, and then by 1.1717 and 1.17.

Some resistance awaits at 1.1770, a stepping stone on the way down, and then by 1.1820, Tuesday's high point. Further above, 1.1850 and 1.1880 await the bulls. 

Turnaround Tuesday: Why some currencies recovered and others didn't?

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD hovers around 1.1900, retains weekly gains

The EUR/USD pair trades around the 1.19 mark after the Eurozone Q2 Prelim GDP beat estimates with 2% while US PCE inflation rose by less than anticipated in June, printing at 3.5% YoY. Risk-on mood persists.

EUR/USD News

GBP/USD retreats after flirting with 1.4000

GBP/USD retreated from near the 1.4000 level, but the greenback remains away from investors' radar. Optimism over the Brexit issue and the declining trend in new COVID-19 cases in the UK offers support to the pound.

GBP/USD News

XAU/USD slides to $1,820 area, downside seems limited

Gold traded with a mild negative bias around the $1,825 region, or daily lows, during the early North American session, albeit lacked any follow-through selling.

Gold News

Shiba gets listed on eToro as demand for SHIB skyrockets

Leading investment platform eToro has been adding cryptocurrency assets on popular demand from users. The Dogecoin killer recently amassed 600,000 holders despite range-bound price action. 

Read more

NIO shares rise again as Wall Street shrugs off recent China woes

NYSE:NIO added 1.86% as EV and China stocks bounced back again. Nio rides higher as industry leader Tesla gets some major upgrades. Nio rival XPeng releases a refreshed look for its compact SUV.

Read more

Majors

Cryptocurrencies

Signatures