EUR/USD Forecast: Five reasons to favor the downside, not all corona-correlated

• EUR/USD has been grinding lower amid a worsening market mood.
• Coronavirus figures are encouraging, but other factors are weighing on the pair.
• Tuesday's technical four-hour chart is pointing to the downside.

Finally a drop in active COVID-19 cases in Italy – yet upbeat statistics from the hardest-hit country as well as Spain, France and Germany have failed to lift the euro as worrying global events boost the safe-haven dollar while other European issues weigh on the common currency. 

Following the upbeat data, Italian PM Giuseppe Conte announced that he will ease restrictions on May 4. Spain reported only 399 coronavirus deaths on Monday – the lowest in almost a month and encouraging after several days of stubborn figures. The country ramped up its testing capacity. France and Germany also experienced better statistics  In New York, the epicenter of the US outbreak, the governor reported the sixth consecutive day of declines in deaths.

Why isn't the safe-haven dollar retreating in response to the improvement on the health front? And how come the euro is not rising given the European progress in containing the disease? One answer is that statistics reported on Mondays tend to be lower due to reporting issues over the weekend. See Coronavirus figures: Why traders should ignore Mondays and Tuesdays, focus on other stats

More importantly, EUR/USD trades are eyeing five other factors:

Five EUR/USD downers

1) Oil crash: Contracts on WTI oil for May crashed below zero. There were some technical quirks involved in the sell-off and the June contract – trading around $20 – is now the reference. Nevertheless, the rout represents the diminishing demand for the most-used commodity amid the coronavirus lockdowns and the storages are becoming flooded. The crash in petrol prices is boosting the greenback.

2) North Korea: According to reports in the US, the rogue regime's leader Kim Jong-un was in a grave situation after undergoing heart surgery. While the press in South Korea is calmer, any succession battle in North Korea – armed with nuclear bombs – may endanger the world and is another boost for the dollar.

3) Fears of EU Economic damage: While the health situation is improving in the old continent, the lockdowns are taking their toll. The Bank of Spain estimates a double-digit fall in Gross Domestic Product this year and sees tourism returning to work only in 2021. The German ZEW Economic Sentiment beat expectations with 28.2 points but Current Conditions disappointed with -91.5. 

4) European Union in disunity: Leaders of the bloc are gearing up for another battle about mitigating the economic fallout from the coronavirus. Spain has offered a package worth €1.5 trillion, and this is supported by several officials in Brussels such as Frans Timmermans, the Executive Vice President of the European Commission.

Italy, France, Spain, and several other countries have demanded to issue common European bonds i– dubbed "coronabonds" – while other countries led by Germany oppose the concept. Chancellor Angela Merkel reiterated her rejection of such a scheme on Monday. The Netherlands is also opposed and has been accused of serving as a tax haven by Italy. The growing spread between Italian and German debt reflects fears the debt and corona-stricken nation will struggle to repay its debt. 

While the European Central Bank launched a massive €750 billion bond-buying program, economists at Citigroup say the money would run out in October. 

5) More disappointing US data: Last week's disappointing statistics worried investors and boosted the dollar. Will it happen again today? Existing Home Sales figures for March carry relatively upbeat expectations, which may be misguided.

See Existing Home Sales: Unemployment strikes the housing market

Overall, there are plenty of reasons to worry, and that may push EUR/USD further down.

EUR/USD Technical Analysis

Euro/dollar is trading at the lower end of its recent range and below the 50, 100, and 200 Simple Moving Averages on the four-hour chart. Bears remain in the lead.

Support awaits at the recent low of 1.0810, followed by April's trough of 1.0770. Next, we find the 2020 low of 1.0640. 

Resistance awaits at 1.09, which is the weekly high and where the 50 and 100 SMAs hit the price. It is followed by 1.0930, a swing high from early April, and then by 1.0995, April's high.