The euro to dollar (EURUSD) price is down by 0.20% as the market reacts to the rising number of Covid-19 cases in Europe and the fading hopes of a stimulus deal in the US. It is trading at 1.1835, which is lower than last week’s high of 1.1865.
The biggest concern among traders is that the Eurozone is barrelling towards another contraction in the fourth quarter as the number of Covid-19 cases continue rising. Over the weekend, countries like France, Spain, Germany, and Italy continued reporting a record number of cases. As the cold season continues, analysts believe that the situation will worsen.
In response to the cases, European governments have started implementing strict new rules. In Ireland, the government has announced another round of lockdowns. Similarly, in Italy, the government announced that most non-essential businesses like spas, bars, and restaurants will close by 6pm. The same situation is happening in Spain and other European countries.
As such, the EURUSD is falling because traders anticipate a situation where the economy records another contraction in the fourth quarter after bouncing back in the second quarter. Worse, some European countries like Italy and Spain are in a tough place, with rising public debt and unemployment rate.
The EURUSD is also falling because of the overall stronger US dollar as hopes of a stimulus deal before the upcoming election rise. In statements made during the weekend, Democrats and Republicans traded blame for the stalemate. Without stimulus, analysts expect that the US economy will be at risk of slow growth and higher unemployment rate.
Euro to dollar technical outlook
The 45-minute chart shows that the EURUSD price started dropping when it reached a high of 1.1865 on October 23. The price is now along the 23.6% Fibonacci retracement level. This retracement connects the lowest and highest levels in October.
The 15-day and 25-day exponential moving averages are also close to making a bearish crossover. Importantly, the price is forming a bearish flag pattern that is shown in green. Therefore, I suspect that the euro to dollar will continue falling as bears aim for the next support at 1.1820 and 1.1800.
On the flip side, a move above Friday’s high of 1.1865 will invalidate this trend because it will send a signal that there are still sellers in the market.
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EURUSD technical chart
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