EUR/USD Forecast: Ready to lose double-bottom? Three reasons to fall as coronavirus crisis worsens

• EUR/USD has been advancing as the dollar slipped with yields, but US politicians may change that.
• The dire situation in Europe and the prospects of further economic strain may weigh heavily on the euro.
• Monday's four-hour chart is pointing to further losses below the double-bottom.

A new week – a fresh selling opportunity? Make the trend your friend goes the trading adage, and nothing suggests a change in the pattern – not in coronavirus cases nor the direction of EUR/USD.

The US dollar has kicked off the week with a drop against major currencies as investors flock into US bonds, pushing yields lower and weighing on the greenback. However, this could be temporary.

1) US disagreements will likely end

The latest factor depressing investors is the disagreement in Washington. Democrats have refused supporting Republicans' support bill to companies as it consists of few strains attached. The opposition wants firms that receive help to adhere to specific rules while the ruling party is laxer. 

Nevertheless, the urgency of the coronavirus crisis will likely to bring politicians together, finding a quick compromise. Previous issues on coronavirus bills were resolved quickly. Everybody wants to be seen as making her/his best effort to mitigate the economic fallout from the crisis. 

Moreover, every politician on Capitol Hill would want to be seen as outdoing their colleagues. The final sum could be huge. In turn, that would mean more funding needed, and could thus put selling pressure on bonds, pushing yields higher and carrying the dollar with it.

More: Is the US already in a recession?

2) Europe is in dire straits

Coronavirus is taking a heavy toll on Europe. The death toll in Italy surpassed 5,000, with only a few signs that the pace is slowing down. Prime Minister Giuseppe Conte announced new restrictions, shuttering non-essential factories and banned almost all movement in the country.

Spain has also seen a surge in cases and in deaths, which top 1,700. Prime Minister Pedro Sánchez has rejected calls to tighten restrictions but extended the lockdown through at least April 11. The eurozone's fourth-largest economy has called for a "Marshall Plan."

In Germany, the government is finally ready to take up more debt to counter economic fallout. Chancellor Angela Merkel – which is in self-isolation after coming in contact with the doctor that tested positive for Covid-19 – is limiting gatherings to no more than two people. 

Overall, the worst is yet to come – both in the virus's human toll and its economic one. 

Wuhan, the Chinese city where coronavirus originated, is only now relaxing its severe curfew – two months after it started. Restrictions in democratic Europe are looser than in China and may take longer. 

Additional reports from the old continent will likely rock markets. Eurostat's Consumer Confidence survey for March is set to drop.

3) Technicals are pointing lower

EUR/USD four-hour chart is pointing to lower lows and lower highs – a downtrend. The Relative Strength Index is above 30 – outside oversold conditions, while momentum remains to the downside. To add insult to injury, the 50 Simple Moving Average is on the verge of crossing the 200 SMA to the downside – yet another bearish sign.

Some support awaits at 1.0720, a line dating back to 2017. It is only followed by 1.0635, and the fresh 2020 low touched twice – a double-bottom. Next, 1.0580 and 1.05 are the next levels to watch.

Resistance awaits at the daily high of 1.0770, followed by 1.0835, Friday's high. It is followed by 1.0950, a separator of ranges seen last week. Another such line is 1.1050. 

More: Coronavirus market turmoil explained: Dollar, stocks, gold, oil, and more