Today we shall take a look at the EUR/USD currency pair. Last week we saw a downward correction in the trend of this pair, but it seems that over the weekend a new bullish momentum appeared on the chart, though it is not clear how long lived it will be.
The European single currency at the moment is under a lot of stress due to the resurgence of the coronavirus pandemic in Europe. The continent saw an increase of more than 135,000 cases yesterday, with a decent chunk of those coming from France, Spain, Germany, and the Netherlands. The alarm bells are ringing everywhere as the coronavirus is set to clash with the regular flu season. Investors fear more lockdowns and travel bans will further impede the economic recovery in the region. As an early estimate of that, at the end of this week there will be consumer confidence indices and flash PMIs from the European Union. However, with the return of Covid-19 so late into Q3, it might be Q4 that investors should really be worried about. Prolonged coronavirus troubles will most certainly weaken the euro and begin undoing the massive progress of this summer, when stimulus boosted the single currency.
The US dollar is now almost completely under the influence of the upcoming US presidential election, which is just two weeks away. Most polls are pointing to Joe Biden as the likely winner but his results are less favorable than Hillary Clinton’s were in 2016, and Donald Trump still managed to emerge victorious then. This serves as a reminder that polls are not everything, leading to a highly volatile situation when it comes to the election. Furthermore, after roughly three months of negotiations, it seems that there will not be a stimulus bill before the elections. As a result, the prospect of a fast economic recovery in the United States has dimmed, increasing risk aversion among investors. As such, the USD has found an opportunity to stabilize due to it being a safe haven asset. Expect risk sentiment to continue influencing the value of the dollar for the time being.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1717, with the price currently trading above it. The daily support levels lie at 1.1709 and 1.1703. The daily resistances are located at 1.1723 and 1.1731, both overcome. The indicators of technical analysis are a bit mixed but ultimately recommend a sell position today.
