EUR/USD to plummet towards 1.10 on a break below 1.1275/50 support zone – Westpac

Ahead of the European Central Bank’s December meeting, key officials continue to stress patience and no 2022 rate moves. What’s more, COVID-19 case increases and restrictions are adding to the weight on EUR. Therefore, economists at Westpac notes that the EUR/USD pair is at risk of falling below the 1.1275 support.

EUR/USD rebounds to be capped around 1.14 

“Post-summer reopening, new variant spreading and considerable resistance to vaccinations, with some 30% of the adult population unvaccinated in Germany and Austria, has led to a recent surge in case counts. This is now impacting EUR after a series of disappointing hard and survey activity reports.” 

“The ECB’s meeting and projection updates are still four weeks away. Meanwhile, Lagarde has voiced concern over rising Covid cases while affirming ECB’s policy patience and that current inflationary pressures remain transitory, despite being more persistent.” 

“Next week’s consumer, flash PMI and IFO surveys will be of increased interest. If there are any signs of Covid cases impacting the surveys, EUR will be under increasing pressure despite recently holding 1.1275 support.” 

“EUR/USD rebounds are likely to be capped around 1.14 unless surveys prove to be notably strong. A break below 1.1250-75 could trigger another 2 figure decline.”