- EUR/USD has been under pressure as coronavirus cases are surging in Europe and the US.
- US fiscal stimulus talks seem closer to collapse.
- Uncertainty about the elections also boosts the safe-haven dollar.
- Monday's four-hour chart is painting a mixed picture.
Winter is coming but the autumn is already awful. Coronavirus is raging in the old continent and weighing on the euro, pushing it off the highs. France has reported a daily record of cases on Saturday – only to surpass it on Sunday and reach 52,000. Per population, Belgium and the Netherlands are doing worse than their southern neighbor.
Governments are also taking action. Spanish Prime Minister Pedro Sánchez addressed the nation and declared a new state of emergency that he wishes to extend until May while Italy is preparing additional limitations that would help curb the disease – and also risk the economic recovery.
While the increase in Europe's spread of the disease is weighing on the euro, the increase in the US is boosting the safe-haven dollar. The world's largest economy reported daily records of above 80,000 cases, pushing its seven-day moving average higher.
The disease is also spreading in the White House, where several aides to Vice-President Marc Short have come down with the virus. Moreover, hospitals in Utah are preparing to ration admission to Intensive Care Units, in a grim reminder of the first wave in New York.
Mortalities are on the rise on both sides of the Atlantic:
Source: FT
Another factor for the flight to the safe-haven dollar is the probable breakdown of fiscal stimulus talks. House Speaker Nancy Pelosi and White House Chief of Staff Mark Meadows were busy pointing the figure at each other over the weekend.
With so little time until the elections, a deal always had little chances – but now markets seem to come to grips with it. Moreover, Senate Republicans are focused on confirming Amy Coney Barret to the Supreme Court and remain skeptical about the need for further stimulus.
The upcoming US elections are also a cause for uncertainty and dollar demand. Challenger Joe Biden continues leading President Donald Trump, and Democrats have a chance of flipping the Senate. Investors favor such a "blue wave" that would enable passing a generous stimulus package.
However, there have been few opinion polls since the last presidential debate, and speculation remains rife. See: US Elections: Debates matter but how much?
Dems have a 73% chance of winning the upper chamber according to Nate Silver's FiveThirtyEight.
Source: FiveThirtyEight
It is essential to note that nearly 60 million Americans have already cast their ballots – including Trump – and that amounts to around 43% of the total vote count in 2016. Turnout is set to break records in 2020.
All in all, this trifecta of worries is weighing on EUR/USD.
The economic calendar features the German IFO Business Climate for October, which may edge lower due to the pandemic's winter wave. Later in the day, US New Home Sales for September are projected to show annualized sales holding above one million.
EUR/USD Technical Analysis
Euro/dollar set a lower high and momentum on the four-hour chart has turned negative – both bearish signs. However, the currency pair is holding above the 50, 100, and 200 Simple Moving Averages.
Critical support awaits at 1.1785, which was a low point on Friday and also where the 50 SMA hits the price. Further down, 1.1760 was a support line on the way up and it is followed by 1.1720 and 1.1685.
EUR/USD is struggling with 1.1840, which provides support last week. The next level to watch on the upside is 1.1860, the daily high, followed by 1.1880, October's peak.
See 2020 Elections: Seven reasons why this is not 2016, time to focus on the Senate
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Australian Dollar steady as markets asses minor US data
The AUD/USD regained positive traction on Thursday following the overnight pullback from a one-week top. A softer US Dollar and a positive risk tone benefited the Aussie, as well as the Reserve Bank of Australia’s (RBA) hawkish stance.
EUR/USD: Further losses now look at 1.0450
Further strength in the US Dollar kept the price action in the risk-associated assets depressed, sending EUR/USD back to the 1.0460 region for the first time since early October 2023 prior to key releases in the real economy.
Gold faces extra upside near term
Gold extends its bullish momentum further above $2,660 on Thursday. XAU/USD rises for the fourth straight day, sponsored by geopolitical risks stemming from the worsening Russia-Ukraine war. Markets await comments from Fed policymakers.
Ethereum Price Forecast: ETH open interest surge to all-time high after recent price rally
Ethereum (ETH) is trading near $3,350, experiencing an 10% increase on Thursday. This price surge is attributed to strong bullish sentiment among derivatives traders, driving its open interest above $20 billion for the first time.
A new horizon: The economic outlook in a new leadership and policy era
The economic aftershocks of the COVID pandemic, which have dominated the economic landscape over the past few years, are steadily dissipating. These pandemic-induced economic effects are set to be largely supplanted by economic policy changes that are on the horizon in the United States.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.