The bearish momentum of the EUR/USD continued, reaching a 4-month low at the 1.1710 support, as the pair trades in the last session of Q1 2021. The Forex market and the EUR/USD currency pair will be reacting to a bundle of important European and American economic data today. The recent announcement by the major European economies to impose strict COVID restrictions at a time when the continent faces a weak pace in vaccinations, in addition to weak stimulus plans, remain constant pressure factors on the performance of the euro.
Vaccine export restrictions will top the agenda on Thursday and Friday of the European Council meeting as the bloc accelerates to ramp up its lackluster program, pushing the Eurozone back into recovery for months compared to the United Kingdom, the United States and other countries. The divergence in the economic outlook has already had meaningful consequences with the European Central Bank (ECB), introducing pre-planned purchases of government bonds as part of its quantitative easing program to prevent higher Eurozone yields in line with their global counterparts. This was just as the Bank of England, Federal Reserve and others point to the indifference to the increased yields provided by UK and US bonds, which reflects investor optimism about interest rate expectations.
The euro is exposed to uncertainty. Due to the uncertainty of the future of the Coronavirus Recovery Fund in the European Union, after its legitimacy was challenged in the German Constitutional Court. Commenting on this, Jörg Kramer, Chief Economist at Commerzbank said: “The German Constitutional Court has prevented the president from issuing a law ratifying the so-called EU Special Resources Decision until a decision is made on a temporary injunction. We consider it unlikely that the parliament will ultimately declare the ratification law unconstitutional," he added. It is true that Article 17 of the European Union’s Financial Regulations stipulates that the European Union “may not raise loans within the framework of the budget”. But without Germany, the European Recovery Fund cannot actually take off, which could lead to market turmoil and hence the price of the EUR.
German health officials have agreed to restrict the use of the AstraZeneca vaccine in people under the age of 60, amid new fears of unusual blood clots that have been reported in a small number of those who have received this vaccine. Accordingly, Minister of Health Jens Spahn and state officials unanimously agreed to give the vaccine only to people 60 years of age or older, unless they belong to a high-risk group for serious illness from COVID-19 and agreed with their doctor to take the vaccine despite its small size because it is not exposure to the risk of fatal side effects.
Technical analysis of the pair:
The continuation of the aforementioned pressure factors will continue to support the bears' dominance, and it may happen that the technical indicators reach strong oversold levels. Accordingly, the levels of support closest to the pair may be 1.1685 and 1.1590. The last level is more appropriate to consider buying while waiting for a technical bullish rebound that may occur at any time. On the upside, the psychological resistance of 1.2000 will remain the most important for a strong and real shift to the current downtrend.
Regarding the euro, German unemployment figures and the Consumer Price Index reading in the Eurozone will be announced. Regarding the dollar, the ADP reading will be announced to measure the change in the number of US non-farm payrolls, the Chicago PMI reading and pending home sales.