The EUR/USD currency pair succeeded in breaking its previous narrow range of 1.17 to 1.1750 and climbed to fresh intra-day highs towards 1.1770 level, remained supported by the European Union (E.U.) EUR750 billion coronavirus relief package. However, the gains in currency pair could also be attributed to the broad-based U.S. dollar bearish bias, backed by virus pains in the U.S., which continue to fuel worries that the second wave of COVID-19 cases could undermine the U.S. economic recovery.
It is worth recalling that the bid tone around the shared currency was also being bolstered by Germany's influential IFO institute report, which showed the export expectations for Europe's economic powerhouse improved sharply in July. At the moment, the EUR/USD currency pair is currently trading at 1.1765 and consolidating in the range between 1.1714 - 1.1769. Moving on, the currency pair buyers seemed cautious to place any strong position ahead of the Fed meeting.
The Eurozone economy is expected to see slightly stronger growth, in the wake of the European Union (E.U.) EUR750 billion coronavirus relief package, as per the economists surveyed by Reuters. Further added, it would take two or more years for eurozone gross domestic product to reach pre-COVID-19 levels.
At the U.S. virus front, the number of confirmed coronavirus cases in the Arizona state increased by 2,107 to a total of 165,934 so far while the death toll increased by 104 to 3,408 and the current hospitalization dropped by 62 to 2,564. Apart from this state, the number of confirmed coronavirus cases in the Florida state rose by 9,230 to a total of 441,977, while the deaths toll rose by 191 to 6,240, and the hospitalization decreased by 75 to 9,023 according to Florida's Department of Health statement. Almost 4 U.S. states reported one-day records for coronavirus deaths on the previous day, and Texas cases passed the 400,000 marks. However, these fears have exerted significant pressure on the market trading sentiment and made the U.S. dollar weaker.
As a result, the broad-based U.S. dollar failed to gain any positive traction on the day, and reporting losses as the United States crisis of virus could ruin hopes for a quick economic recovery, which kept the investors cautious. However, the declines in the U.S. dollar helps the currency pair to stay higher.
The Federal Reserve is broadly expected to deliver a dovish tone and signal higher tolerance for inflation due to the second wave of coronavirus cases, the Sino-US tensions, the fiscal failure in the U.S., and the resulting concerns over the future course of the U.S. and global economy. The broad-based U.S. dollar could face deeper losses, which will likely push the EUR/USD currency pair higher above 1.18 only if the Federal Reserve meeting signals higher tolerance for inflation.
Despite the upcoming expiration of unemployment claim benefits, the $1 trillion U.S. coronavirus rescue package remains elusive. The House Speaker Nancy Pelosi and the White House Chief of Staff Mark Meadows recently indicated the difference between the Republicans and Democrats. However, this political uncertainty could put brakes on the dollar further downside bias and capped the upside in EUR/USD near 1.1780. Looking forward, the market players will carefully follow the U.S. Fed meeting wherein the U.S. central bank will likely keep rates unchanged and sound dovish on the day.
Daily Support and Resistance
S1 1.1632
S2 1.1677
S3 1.1699
Pivot Point 1.1721
R1 1.1743
R2 1.1766
R3 1.181
The EUR/USD is consolidating at 1.1728 level, lingering above a support level, which worked as resistance in the past, of 1.1715. As you can see on the hourly chart, the EUR/USD traded in an overbought zone and has now started dropping towards a 50% Fibonacci retracement level of 1.1680 while it has already completed 38.2% Fibo retracement at 1.1705 level. Below 1.1705, we may see EUR/USD prices dropping towards 1.1705 and 1.1680 level. In contrast, the resistance stays at 1.1778 and 1.1832 level. Let's consider selling below 1.1702 and buying above 1.1778 level today. Good luck