EUR/USD: Covid reality bites, critical support at 1.1780 in danger

EUR/USD has struggled to hold onto gains related to vaccine hopes as Covid's hold in Europe and the US is weighing on markets. Critical support at 1.1780 is in danger, as FXStreet’s Analyst Yohay Elam notes. 

Key quotes

“The old continent continues grappling with COVID-19. The latest major development is that Italy slapped restrictions on additional regions and is under pressure to announce a nationwide lockdown. Italian Prime Minister Giuseppe Conte has to deal with protests against further measures that choke the economy. In Germany, which announced a relatively light shuttering, cases and deaths continue rising.” 

“The situation in the US is also deteriorating. Not only are infections and mortalities rising, but hospitalizations have reached an all-time high and some facilities are strained. Nevada's governor asked his residents to stay at home, but so far refrained from making it obligatory.”

“Christine Lagarde, President of the European Central Bank, will speak later in the day. She may comment on the vaccine but is unlikely to back down from her intention to expand the bond-buying scheme. The focus may begin shifting to economic performance rather than politics. 

“Momentum on the 4-hour chart has turned to the downside, a bearish development. Euro/dollar is approaching critical support at 1.1780, which was a swing low earlier this week and also a cushion in late October. Moreover, it is where the 100 Simple Moving Average hits the price. Below 1.1780, the next line to watch is 1.1760, which is the confluence of the 50 and 200 SMAs. Resistance is at 1.1830, the daily high, followed by 1.1860, a swing high from last week.”