EUR/USD Forecast: New lows ahead of the weekend? ECB, covid and technicals all point lower

• EUR/USD has been pressured by the ECB's commitment to lower rates for longer. 
• Concerns about the Delta coronavirus variant have been mounting and may support the dollar. 
• Friday's four-hour chart is showing that bears are in control.

Optimism has been weighing on the safe-haven dollar – but not against the euro. The common currency's failure to recover is a sign of weakness that could be followed with falls to fresh lows once the mood sours again – and there are reasons to expect that to happen sooner rather than later.

European Central Bank President Christine Lagarde and her colleagues are behind the euro's weakness. In the ECB's first post-strategic review decision, the Frankfurt-based institution enhanced its commitment to keeping lower rates for longer. After initial choppiness, investors were convinced.

The ECB wants to see its own forecasts point to 2% annual inflation in the middle of its horizon – and holding above that level until the end of that period – before considering lifting borrowing costs. The bank's scope is three years, and its projections in recent years left estimates at below that level. 

Moreover, the bank has officially embraced a temporary overshoot of price rises and will take core inflation into account as well. While the ECB lags behind the Federal Reserve's lax approach on price rises, it is a significant step forward for an institution based on German fears of inflation. 

ECB Analysis: Three dovish changes hit EUR/USD, more could be in store

What about the ECB's bond-buying scheme? The lack of any change on that front provided initial support for the euro, but it failed to hold on. 

Lagarde expressed worries about the rapid spread of the Delta COVID-19 variant, reflecting growing concerns all over the world. Italy has followed France's footsteps in requiring vaccine passports for certain activities amid rising cases. Infections are on the rise across the continent.

On the other side of the pond, the US CDC issued a warning about the strain and urged Americans to get vaccinated. On Thursday, stock markets were focused on tech earnings, but the mood could change on Friday. Any fresh worries about covid could trigger flows into the safe-haven dollar. 

Markit's preliminary Purchasing Managers' Indexes may also serve as a source of worry. Apart from the virus, supply chain issues and staff shortages may have caused a slowdown in economic activity in both the US and the eurozone. 

US Markit PMIs Preview: Pre-weekend dollar boost? Downbeat figures could exacerbate risk-off mood

Overall, the dovish ECB decision and flows into the dollar could push the currency pair lower.

EUR/USD Technical Analysis

Euro/dollar failed in its attempt to hold above the 50 and 100 Simple Moving Averages on the four-hour chart and momentum remains to the downside. The graph is also pointing to lower lows. 

Some support awaits at the daily low of 1.1760, with more significant support at the July trough of 1.1750. The next lines to watch are 1.1717 and 1.17.

Resistance is at 1.18, where the 50 SMA hits the price. Thursday's swing high of 1.1830, 1.1850 and 1.1880 are the next levels to watch.