- EUR/USD prints mild gains but struggles to lure bulls around 16-month low.
- Germany’s virus-led death toll crosses 100,000 mark, fears of virus variant spread.
- DXY tracks yields to the south as Fed rate hike odds dwindle amid covid resurgence.
- ECB’s Lagarde, Panetta eyed for fresh impulse, US traders’ reaction after holiday and yields will be important.
EUR/USD grinds higher during the most upbeat daily performance heading into Friday’s European session. The major currency pair seesaws around 1.1225, up 0.13% intraday, while cheering the downbeat yields despite covid woes in Europe.
Germany marks a jump in the coronavirus led deaths to cross the 100,000 mark. Reuters said, “Another 351 people have died from coronavirus, bringing the total since the start of the pandemic to 100,119, data from the Robert Koch Institute for infectious diseases showed. The number of new daily cases hit a new record of 75,961.” On the same line, Austria already announced local lockdowns due to the virus outbreak but French Health Minister Olivier Veran said on Thursday that they will not announce any new coronavirus-related lockdown or curfew, as reported by Reuters.
On a broader front, the World Health Organization (WHO) has called for a special meeting to discuss the new version of the virus and any fears emanating from it to confirm its status as a “variant of concern.” The chatters over the virus version spotted from South Africa, with a formal name of B.1.1.529, grow stronger and weigh on the risk appetite as it is said to be immune to the vaccines.
While portraying the mood, the US 10-year Treasury yields drop eight basis points (bps) to 1.565%, extending Wednesday’s pullback from the monthly peak whereas the S&P 500 Futures mark 1.0% downside at the latest. That said, the US Dollar Index (DXY) drops 0.08% to 96.70 at the latest.
It’s worth noting that the virus woes weigh on the yield and reject the rate hike calls. However, the ECB policymakers haven’t been hawkish either, which in turn probes the EUR/USD bulls of late.
The Governing Council members generally agreed that the “hump” in inflation will subside next year even as the supply bottlenecks will last longer than initially anticipated, per the latest Minute Statement of the European Central Bank’s (ECB) October meeting. Additionally, Chief Economist Philip Lane reiterated that he expects inflation to fall below target over the medium term.
Moving on, speeches from ECB President Christine Lagarde and policymaker Fabio Panetta will offer intermediate direction but major attention will be paid to the covid updates and yields for clear direction.
Technical analysis
EUR/USD corrective pullback remains below the 61.8% Fibonacci retracement (Fibo.) of March 2020 to January 2021 upside, which in turn suggests the pair’s further declines. In addition to the stated key Fibonacci retracement level around 1.1295, a convergence of the 50% Fibo. and March 2020 high near 1.1500, as well as the 200-week SMA level of 1.1552, also challenge the buyers. On the contrary, lows marked during the late June 2020, surrounding 1.1170, question the sellers before the re-entry.