The EURUSD price declined sharply in overnight trading as the market reacted to the latest Covid-19 vaccine news. The pair fell to a low of 1.1730, which was the lowest it has been since October 7.
The number of Covid-19 cases has been rising in most countries in recent days. In the United States, the number of cases has been rising by an average of 50,000. The same rising trend has happened in other countries like Germany, United Kingdom, and Spain.
As such, a vaccine would reassure investors that the spread will reduce. However, problems have emerged in the testing phase of these vaccines. Yesterday, Johnson & Johnson, a major contender announced that it was pausing its testing after a subject fell ill.
Later in the day, test of an antibody being developed by Eli Lilly was paused by the US government on safety concerns. As such, the EURUSD dropped partly because investors are worried about the pace of the vaccine development.
The euro to USD pair also dropped because of the ongoing earning season. Yesterday, results from banks like JP Morgan and Citigroup, together with those from Blackrock were better than what analysts were expecting. Still, the companies warned that the economy was still in shaky grounds and called for more stimulus. Today, we will receive results from companies like Goldman Sachs and PNC Financial.
In a report, analysts at UOB said this about the EURUSD price:
“While the rapid drop appears to be running ahead of itself, there is scope for EUR to weaken further even though the 1.1700 support is likely out of reach for now. On the upside, a break of 1.1780 (minor resistance is at 1.1760) would indicate the current downward pressure has eased.”
EURUSD technical outlook
The hourly chart shows how the EURUSD price dropped and reached a low of 1.1730 yesterday. Since then, we have seen some indecision among traders about the direction of the pair. This has led to the creation of a bearish pennant pattern. In our free forex trading course, this pennant is usually a bearish sign. The price is still significantly below the 25-day moving averages.
Therefore, for today, I suspect that the price will resume the downward trend and possibly test the support at 1.1730 and possibly the October 7 low of 1.1725. The alternate scenario is where bulls come in and attempt to regain the yesterday’s high. If this happens, the pair may at least move to the middle of the candle at about 1.1770.
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Euro to USD technical chart
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