EUR/USD Forecast: One uptrend support lost, next to fall? Blame Biden, US coronavirus crisis

EUR/USD has been on the back foot as US coronavirus deaths rise and Biden bashes Wall Street.
Speculation about the EU summit and updated COVID-19 statistics are eyed.
Friday's four-hour chart is showing a worsening picture for bulls.

Yohay Elam FXStreet

"Wall Street CEO did not build America" – these words by Joe Biden, the presumptive Democratic nominee sent shivers down investors spines, and supported the safe-haven US dollar. President Donald Trump continues trailing Biden by a formidable margin of nine points and the challenger's statement that "the era of shareholder capitalism is set to end" have not helped either.

The current occupant of the White House has not been helping his reelection chances. Trump insisted on opening schools as soon as possible and also threatened to punish those that do not do so. His eagerness to return to normal is at stark contrast with the rapid deterioration in America's coronavirus crisis.

Daily cases remain close to the peak at around 60,000 – and may be held back due to a lack of testing capability in several states. Laboratories and hospitals are strained in Arizona and elsewhere. Moreover, the number of deaths is also on the rise, nearing 1,000 daily.

See:

OK, our daily update is published. States reported 637k tests. Today’s case count is the second-highest in our data; the record was set yesterday. Hospitalizations kept moving upward, and states reported 867 deaths. pic.twitter.com/yHiWEpz8IK
— The COVID Tracking Project (@COVID19Tracking) July 9, 2020

These figures may deter consumers and may trigger more restrictions – or at least a halt to reopening that Trump wants. The gloomier prospects are seen in high-frequency data but not in standard economic publications. Initial jobless claims dropped to 1.314 million, beating expectations while continuing ones are at 18 million. Nevertheless, these are still dire figures.

US producer prices will likely show some stability, leaving the focus on new coronavirus figures, starting from Florida, and continuing across the US. Opinion polls may also be of interest.

In the old continent, coronavirus seems under control, and the focus is on fiscal policy. Pascal Donohue, Ireland's finance minister, has been nominated as the President of the Eurogroup. Will he help push leaders to approve the recovery plan?

Christine Lagarde, President of the European Central Bank, cast doubt about the upcoming EU Summit and any agreement on the ambitious program. The EU Commission, backed by Germany and France, included €500 billion in mutually funded grants. That is currently unacceptable to the "Frugal Four" – Austria, the Netherlands, Denmark, and Sweden.

The ECB is set to leave its policy unchanged next week, but will likely urge action from leaders.

See European Central Bank Preview: EUR/USD depends on Lagarde's fearless nudging of the Frugal Four

Overall, various concerns are set to move euro/dollar.

EUR/USD Technical Analysis

On its way down, EUR/USD slipped below the steep uptrend support that had accompanied it since early July. It is still holding above the more moderately shaped uptrend support that dates back to May.

One gone, another one to go?

Momentum on the four-hour chart has turned negative and EUR/USD dropped below the 50 Simple Moving Average. Nevertheless, it is holding above 100 and 200 SMAs.

The moderate uptrend support line awaits around 1.1250. It is followed by 1.1220, a stepping stone on the way up. The 1.1190 level cushioned EUR/USD several times last week and it is followed by the mid-June trough of 1.1160.

Resistance is at 1.13, the round level that capped it last week. The former triple-top of 1.1350 is next, and July's high of 1.1375 follows.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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