EUR/USD Forecast: Struggling to recover for three good reasons, set to resume falls?

EUR/USD is edging toward 1.18 amid hopes for COVID-19 solutions, yet held by European developments.
The Fed's reluctance to add stimulus continues underpinning the dollar.
Monday's four-hour chart is showing bulls are in control.

Yohay Elam FXStreet

Plasma push – President Donald Trump's talk of approving a coronavirus cure including plasma has boosted the market mood and weighed on the greenback. Efforts to accelerate approval of immunization candidates from Pfizer and AstraZeneca also keep stocks bid – but that remains limited.

Another positive development comes from Sino-American relations, where the US will reportedly allow China's WeChat to continue operating. Nevertheless, Trump's comments that "we do not want to do business with China" are countering that news.

There are three factors keeping the pressure on EUR/USD:

1) Coronavirus concerns

The increase in European coronavirus cases is accelerating, with worrying uptrends in all countries. Spain is the epicenter, but the recent leap in French cases is also grabbing the headlines.

Source: FT

This resurgence also pushed Markit's preliminary purchasing managers' indexes lower, especially in France but also in Germany. So far, COVID-19 remain low in the old continent, but that may change as it did in America

Source: FT

2) Fear of the Fed

The Federal Reserve's meeting minutes from the July meeting showed reluctance to add more monetary stimulus – especially Yield Curve Control that investors are eyeing. That document boosted the dollar last week but may have been dated.

Jerome Powell, President of the Federal Reserve, is due to speak on Thursday and may shed light on the bank's plans. Powell will address the virtual Jackson Hole Symposium, a venue that has been previously used to send clear messages to markets.

If the Fed Chair remains cautious about further moves – only urging lawmakers to do more – markets may struggle and the safe-haven dollar has room to rise.

3) EUR/USD Technicals show bears are in control

Euro/dollar is trading below the 50 and 100 Simple Moving Averages and momentum remains to the downside. Moreover, the currency pair set a lower high on Friday, indicating the downtrend.

Support awaits at 1.1750, the low point on Friday, followed by 1.17, a double-bottom from earlier this month. The next levels are 1.1625 and 1.1545.

Resistance awaits at 1.1830, a swing low from last week, followed by 1.1870, 1.1915, and the two-year high of 1.1965.

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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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