The EUR/USD currency pair failed to stop its previous day bearish run-up and took further offer well below the 1.1800 level, mainly due to the hopes of dovish reports from the European Central Bank (ECB). The risk aversion in stock markets boosted Eurozone government bonds, which pushes yields lower. This, in turn, undermined the shared currency and contributed to the currency pair losses. Apart from this, the selling bias around the currency pair could be associated with the renewed Brexit tensions, which tend to undermine the shared currency and contribute to the currency pair losses.
The broad-based U.S. dollar strength in the wake of risk-off market sentiment also keeps the currency pair under pressure. Also, weighing the quote could be the intensifying tussle between the US-EU over Airbus aid. It's dragging the currency pair down could be fears of on-going coronavirus cases in Spain, France, and German. At the moment, the EUR/USD currency pair is currently trading at 1.1777 and consolidating in the range between the 1.1758 - 1.1784. The market traders seem reluctant to place any strong position as they prefer to wait ahead of the European Central Bank (ECB) monetary policy decision.
The European Central Bank will announce its interest rate decision and release its policy statement tomorrow. Considering this upcoming event, the bond markets are still expecting the ECB's supportive words on Thursday. The markets expect the central bank to show a willingness to do more as inflation expectations have declined with the euro's recent strength. As in result, the single currency may have a tough time ahead. It is worth recalling that the 10-year German bond yield dropped by 5-basis points to -0.51%, and its Italian counterpart declined by 3-basis points to 1.03%.
Also weighing on the currency pair could be the concerns regarding the Brexit. The conflict between the central bank and the bloc's big lenders remain on the cards, as the probabilities of a no-deal Brexit surge after a growing tussle between the U.K. and E.U. This, in turn, undermined the tone around the shard currency and dragged the currency pair down. The European Central Bank (ECB) said that the central bank would increase the pressure on the big European banks, asking them to prepare for Brexit once again as the summer draws to an end.
At the coronavirus front, the sharp rise in the coronavirus cases in Spain, France, and German keeps the worries over the economic recovery on the cards. It is very downhearted headlines that the second wave of the virus is picking up pace in Europe again amid the summer holidays. This also weighed on the currency pair.
At the US-EU front, the newly appointed Trade Commissioner and European Commission Executive Vice-President Valdis Dombrovskis recently warned the U.S. President Trump that the E.U. could slap tariffs on the U.S. goods unless America removes duties imposed over Airbus subsidies. It is worth mentioning that the U.S. imposed $7.5 billion of E.U. goods with duties last October in WTO-authorized retaliation over unlawful support for Airbus. These above comments added further burden around the euro.
At the USD front, the broad-based U.S. dollar extended its previous day bullish trend amid risk-ff market sentiment. Also, supporting the U.S. dollar prices could be the significant selloffs in U.S. stocks. The U.S. markets witnessed a second rout in tech stocks in less than a week, underpinning the U.S. dollar. However, the gains in the U.S. dollar kept the currency pair lower. Whereas, the U.S. Dollar Index, which tracks the greenback against a bucket of other currencies, rose by 0.07% to 93.502 by 10:01 PM ET (3:01 AM GMT).
Looking forward, the market traders will keep their eyes on the European Central Bank (ECB) monetary policy decision. The risk catalyst like geopolitics and the virus woes, not to forget the Brexit, will also be key to watch for the fresh direction.
Daily Support and Resistance
Pivot Point 1.1789
The EUR/USD pair is trading with a selling bais at 1.1762 level, holding below an immediate resistance level of 1.1793 level; we may see a continuation of a selling trade until 1.1706 level. The EUR/USD pair has recently closed a bearish engulfing candle on the 4-hour chart; we may see selling bias below this level until the support level of 1.1706 and 1.1920 level. Good luck!