EUR/USD Forecast: 1.0640, here we come? Non-Farm Payrolls, and three other reasons to fall

Around half of global COVID-19 deaths are concentrated in Italy, Spain, and France – and that is only one of the factors erasing over 50% of late March’s gains.

1) Worrying coronavirus figures in Europe

While Italy has seen as a flattening of the curve – fewer deaths and new cases under control – Spain is setting records in mortalities on an almost daily basis. France, which counts only losses of lives in hospitals, is also seeing rising numbers. The three countries have 29,650 out of 53,146 global deaths.

Updates figures from Spain are due out in the European morning, followed by France and Italy.

2) No coronabonds

Leaders in the old continent remain at loggerheads over the economic relief for the crisis. The three countries and others are demanding “coronabonds” – issuing joint European debt. Germany is leading the opposite camp. Ursula von der Leyen, President of the European Commission, is looking for a compromise alongside the Eurogroup – European finance ministers.

However, without an immediate solution to the fast-evolving problem, the euro has room to the downside.  Sapin reported a leap of 300,000 in jobless claims, allowing the first look into the economic carnage of coronavirus. Markit’s final Service Purchasing Managers’ Indexes will likely confirm the weakness.

3) When the US sneezes, the world catches a cold

Crossing the Atlantic, US Unemployment Claims also paint a grim picture. Requests for benefits have more than doubled to 6.648 million in the week ending March 28 – beyond the worst estimates. Moreover, figures could have been even higher as some states struggled to process the flood of claims. The current level of applications represents an unemployment rate of roughly 10%.

The US dollar gained ground in response to the figures and remains the currency of choice in times of trouble. If the US struggles, the rest of the world suffers, and the dollar is demand.

The focus now shifts to the first coronavirus-impacted Non-Farm Payrolls report – yet it lags jobless claims by around two weeks. March’s labor market surveys were taken on the week including March 12. While it is unlikely to show the devastating destruction of jobs, a loss of 100,000 positions is on the cards. The figures could be a win-win for the dollar.

See:

• Nonfarm Payrolls Preview: Is the dollar’s fate sealed?
• US Non-Farm Payrolls March preview: If it’s terrible, it’s expected, if it’s not, April will be

The ISM Non-Manufacturing PMI is due out after the NFP, but may still move markets. Services sectors all over the world have struggled more than the manufacturing sectors. Economists expect a sharp drop below 50 – reflecting contraction.

See: Non-Manufacturing PMI Preview: The disaster may be delayed...until April

What about the coronavirus situation in the US? It remains dire, with nearly a quarter of the million infections gripping the world’s largest economy. Nevertheless, the rapid spread of the disease in America may prove as another boost for the safe-haven greenback.

4) Technicals are bearish

EUR/USD has lost more than 50% of the gain from 1.0640 to 1.1150, raising the chances that the rise was the correction and that new lows are on the cards. The currency pair is trading below the 50, 100, and 200 Simple Moving Averages, and the Relative Strength Index is above 30 – outside oversold conditions.

Support awaits at 1.0820, Thursday’s low, followed by 1.0750, which was a stepping stone on the way up. The 2020 trough of 1.0640 is critical support.

Resistance awaits at 1.09, which provided support earlier this week, and it is followed by 1.0970, which held it down around the same time. The next levels to watch are 1.1050 and 1.1090.

More: Explained: What indicators matter in coronavirus times