Today we shall take a look at the EUR/USD currency pair. Ever since a steep decline in early May the pair has been trading in an almost flat trend around the 1.08 level.
At present, the European single currency simply doesn’t have any hopes of support. The European economy was heavily hit by the coronavirus pandemic and the lockdowns it necessitated, which paralyzed economic activity. Friday’s GDP reports show that Europe is officially in a recession based on data for the first quarter of 2020. But because the lockdowns extended to April and May for many countries, Q2 is expected to be equally bad, if not worse. If a second wave of the pandemic erupts, it will become a true economic catastrophe should businesses close down again. And then there’s also Brexit, where the talks are not going well, potentially meaning that the UK might crash out of the EU without a deal, which will hurt both parties. Together, these factors are simply too much for the euro to bear, and are keeping it low.
In all fairness, economic data from the United States has also not been excellent. Last week’s initial jobless claims showed higher job loss than expected, meaning the unemployment rate in the US continues to rise, while inflation is decreasing. Weak fundamental reports have led investors to believe that the Federal Reserve will need to cut interest rates into negative territory by 2021 to support the economic recovery of the United States. Meanwhile, the US is still struggling with the heaviest coronavirus outbreak in the world, and might also experience a second wave when the economy reopens. Though the bad economic environment is pressuring the dollar somewhat, the USD is also a popular safety asset and remains stronger than other currencies in the current pessimistic market situation.
In terms of the daily chart, today we have a pivot point for the pair located at 1.0816, with the price currently trading below it. The daily support levels lie at 1.0808 and 1.0799. The daily resistances are located at 1.0826 and 1.0833. The indicators of technical analysis strongly agree on a sell recommendation today.
