EUR/USD: Risk-off mood in the market points to further falls

EUR/USD has been struggling to hold onto the 1.18 level amid a risk-off mood. New week, new lows? Covid, US inflation and technicals point down, Yohay Elam, an analyst at FXStreet, briefs.

Concerns about the Delta variant and rising US inflation to push the pair lower

“In Europe, travel and activity restrictions could weigh on the nascent recovery – and summer holidays. While the US is also experiencing a surge in covid cases, the effect on the currency could be different, as the dollar is a safe-haven currency. The greenback benefits from inflows in times of trouble.” 

“The European Central Bank is also watching the data ahead of its meeting on Thursday, and the ascending infections could bolster the doves – perhaps toward extending the bond-buying scheme. More euros printed could weigh on the common currency.”

“Another factor giving investors a cause for a pause in rising US inflation. Apart from the higher-than-estimated jump in the Consumer Price Index – 5.4% yearly, highest in 13 years – expectations for future increases are also moving higher. [...] If the Fed inches closer to tapering down its bond-buying scheme, the dollar could rise.”

“Critical support awaits at 1.1771, which is July's low. Further down, the next levels to watch date back to early in the year, and they include 1.1740, 1.1717 and 1.17.”

“Some resistance is at 1.1820, which capped the pair in recent days and then 1.1850, a swing high from last week.”