In the absence of major economic releases for the day, we continue to see the EUR/USD guided by concerns over COVID-19.
Looking at the EUR/USD hourly chart above, we see the currency pair slip below 1.18 during the US market session. This turns the strong support region of 1.18 into the resistance for the current price action. A continuation of the bearish momentum will face likely support at 1.17.
It was reported that the increasing infection numbers in Germany and France have led to the consideration of imposing new lockdowns. If done, this will cost the countries’ economies and threaten the economic recovery progress. As Germany and France are the top economies of the Euro Zone, risk aversion has probably increased and negative sentiment is likely to be weighing down on the euro currency.
We are due for the European Central Bank monetary policy event later this week and it is likely that the expectations for the ECB to provide more support will increase. As mentioned previously, while this will help elevate the economic woes, the euro currency may suffer due to the quantitative easing. It is vital to pay attention to this event so as to determine the resulting sentiment.
Across the Atlantic, the US Durable Goods Orders was reported to be 1.9% instead of the estimated 0.5%. This is a notable surprise towards the upside. Reports on the orders of goods are leading indicators of production and thus the level of economic activities. Increasing purchase orders suggests that manufacturers will increase activity to meet the demand, providing downstream benefits such as employment. On the other hand, decreasing orders may indicate an upcoming economic crunch. Therefore this positive development likely increased positive sentiment towards the US dollar.
The price of Gold is currently holding and this suggests demand, which is an indication of possible apprehension.
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