EUR/USD Analysis: Partially Recovers After Yesterday’s Drop
EUR/USD Analysis: Partially Recovers After Yesterday’s Drop
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Key Takeaways:
- Stimulus package negotiations impact EUR/USD
- ECB to focus on economic recovery and not the exchange rate
- Key speeches unlikely to impact EUR/USD
EUR/USD Affected Directly by Current Economic Scenarios
The EUR/USD has seen a chance of recovery today while trying to recoup losses from yesterday’s session. The pair took a hit yesterday when President Trump announced that Republicans will not negotiate for the expected stimulus package. This drove the EUR/USD south with a low of 1.1724. The bottom proved to be enough for the Euro bears as the recovery commenced not later than a couple of hours after the drop.
Presently, the EUR/USD is trading at around 1.1755 with an intraday high of 1.1768. Going higher will require more convincing as the Dollar is now acting as a safe haven amid the uncertainty surrounding US politics and the US government’s response to the pandemic. It’s also worth noting that Chairman of the Federal Reserve, Jerome Powell, yesterday urged lawmakers to act on injecting new cash into the system to keep the recovery running smoothly.
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ECB Focuses on Economic Recovery
Another factor we should consider is that on the Euro side, intentions by ECB are well-known and already priced in. In her press conference yesterday, ECB President Christine Lagarde said that to the ECB, the exchange rate is not a concern now and the institution is not pushing for changes in either direction. The main focus of the European Central Bank will be the economic recovery along with job growth and household stability.
Both the ECB President and the Fed Chairman are expected to speak again later today addressing key issues on economic policies and pandemic recovery. Their positions are already known to the market participants so unless they present new and undisclosed information, it is unlikely that their remarks will trigger any sudden reaction in the EUR/USD.
The technicals for the EUR/USD highlight consolidation in the medium-term ever since the exchange rate reached 1.18 at the end of July this year. With a high of 1.2012 on Sep 1 and a low of 1.1618 on Sep 28, the pair have been gravitating towards the 1.1750 – 1.1850 range. An exit from this range could indicate the readiness of the pair to trend again in an uncertain environment amid the pandemic, upcoming US election, and a combined effect as the US President plans to speak in the next debate on Oct 15 while carrying the coronavirus.