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28 October 2020

Euro wilts as coronavirus lockdown worries hurt sentiment

The euro fell against the dollar on Wednesday following a media report that France’s government was leaning toward reinstating a national lockdown to curb a resurgence in coronavirus cases.

The dollar, however, gave up early gains and fell against the yen as sentiment turned bearish due to uncertainty about the outcome of the U.S. presidential election next week.

The spike in infections “is certainly a concern for France and southern Europe, so the euro’s upside is heavy”, said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.

He added that he does not expect the dollar to gain much against other currencies, “because people have been overly complacent about how markets will react after the U.S. election.”

The euro fell 0.14% to $1.1780 on Wednesday, down for a third consecutive session.

Sterling held steady at $1.3043, supported by hopes for a last-minute trade deal between Britain and the European Union.

The dollar fell to 104.23 yen, approaching a one-month low.

Traders are bracing for more volatility in currency markets as the virus spreads in Europe, Britain, and the United States, fanning concerns that economic growth will weaken once again.

The Australian dollar edged higher after data showed consumer prices in the third quarter rose 1.6% from the prior quarter, slightly more than the median estimate.

The Reserve Bank of Australia is widely expected to lower interest rates and expand its government debt purchases at its next meeting on Nov. 3.

NASDAQ-100 Index (NQ) Futures Technical Analysis – Testing 11550.50 to 11761.75 RT Zone into Close

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A move through 11343.25 will indicate the selling pressure is getting stronger. A trade through 11197.50 will change the main trend to down.

The minor trend is down. This is controlling the momentum. A trade through 12022.00 will change the minor trend to up. This will shift momentum to the upside.

The intermediate retracement zone at 11550.50 to 11761.75 is potential resistance.

The short-term range is 10656.50 to 12249.00. Its retracement zone at 11452.75 to 11264.75 is support. This zone stopped the selling at 11343.25 on Monday.

Short-Term Outlook

The price action on Tuesday indicates that the direction of the index into the close is likely to be determined by trader reaction to the 50% level at 11550.50.

Bullish Scenario

A sustained move over 11550.75 will indicate the presence of buyers. If this is able to create enough upside momentum into the close then look for the rally to possibly extend into the intermediate Fibonacci level at 11761.75.

Bearish Scenario

A sustained move under 11550.50 will signal the presence of sellers. This could trigger a break into the short-term 50% level at 11452.75. If this level fails as support, the selling could extend into yesterday’s low at 11343.25, followed by the short-term Fibonacci level at 11264.75.

EUR/USD Analysis: Bulls losing the grip amid fresh coronavirus jitters, ahead of ECB

Short-term technical outlook

From a technical perspective, the pair was last seen hovering near the 38.2% Fibonacci level of the 1.2011-1.1612 downfall. Some follow-through selling below the mentioned support, around the 1.1770-65 region, now seems to accelerate the fall back towards the 1.1700 mark before the pair eventually slides back to retest September monthly swing lows, around the 1.1615-10 region.

On the flip side, the 50% Fibo. level, around the 1.1815 region, now seems to act as immediate resistance. Above the mentioned hurdle, the pair is likely to make a fresh attempt to challenge the 61.8% Fibo. level, around the 1.1855-60 region. A sustained move beyond the recent swing highs, around the 1.1880 zone, will negate any near-term bearish bias and set the stage for an extension of the recent appreciating move, possibly towards reclaiming the key 1.2000 psychological mark.

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