EUR/USD: Current stability seems like a temporary pause

EUR/USD has managed to stabilize after falling, without any clear driver. Gloom from the European Central Bank (ECB), rising eurozone coronavirus cases and US election uncertainty may weigh heavily. Furthermore, Thursday's 4-hour chart is painting a bearish picture, FXStreet’s Analyst Yohay Elam briefs. 

See – European Central Bank Preview: 14 major banks expectations

Key quotes

“Economists expected the ECB to leave policy unchanged, but events are unfolding rapidly. Both Germany and France declared month-long lockdowns in all of their territories in response to the surge in coronavirus cases. The near-parallel announcements in Berlin and Paris weighed on the euro – and they may push the central bank to act as well.”

“Christine Lagarde, President of the ECB, is unlikely to cut interest rates – as they are already at -0.50%. However, the bank could expand the Pandemic Emergency Purchase Program (PEPP) and announce it is accelerating the pace of bond-buying. She may also opt to lay the groundwork for more action in December when the ECB publishes new forecasts. In any case, the worsening economic outlook will likely be reflected in Thursday's decision and could weigh on the euro.” 

“A long list of opinion polls published on Wednesday continued showing Democrat Joe Biden leading over President Donald Trump, but the races are close in critical states such as Florida – the perennial swing state – and North Carolina, where a critical Senate race is tight. Markets prefer a landslide victory for Democrats, that would enable them to pass a massive stimulus package, and seem to shrug off concerns about market-unfriendly policies. Uncertainty drives traders into the safety of the US dollar, and could also push EUR/USD down.”

“EUR/USD is suffering from downside momentum on the 4-hour chart and is trading below the 50, 100, and 200 Simple Moving Averages. The Relative Strength Index is nearing 30, thus close to oversold conditions, but not there yet.”

“Support awaits at 1.1715, which is Wednesday's low point. It is followed by 1.1685, which is a double-bottom touched in October. Resistance is at 1.1785, which provided support last week. It is followed by 1.1840, 1.1865, and 1.1880 – all high points on the way down.”