EUR/USD: Bounce to be short-lived, three reasons to resume the decline

EUR/USD has been able to stabilize as the EU and UK de-intensify the row over vaccines. Nonetheless, friction around the doses, infrastructure-based dollar strength and upbeat US data may push the pair over the edge, Yohay Elam, an Analyst at FXStreet, reports.

See: EUR/USD to slide into the 1.1695/00 band – Commerzbank

Key quotes

“EU leaders are meeting virtually on Thursday with the covid crisis high on the agenda. Growing frustration from Europeans will likely lead to fresh finger-pointing at anybody but the bloc. Apart from blaming AstraZeneca leaders will likely revert to their anti-UK rhetoric. Worse off, they may continue advancing moves to block exports of vaccines or materials that are used to make them. Even if they stop short of drastic measures, the current truce is far from guaranteeing a solution – at least not on Thursday.

“The White House has announced that Biden will deliver a speech on the economy on March 31, in which he is set to lay out a plan worth as much as $3 trillion. Another boost to the economy would potentially raise inflation and prompt the Federal Reserve to raise interest sooner rather than later. That is dollar positive.”

“Final Gross Domestic Product statistics for the fourth quarter of 2020 will likely confirm the 4.1% growth rate, and jobless claims could continue falling. The latter figure is for the week ending March 19, as the economy accelerated its reopening. Any improvement would also raise speculation for a rate hike – even if the Fed says inflation will only rise at a moderate pace.” 

“The round 1.18 level provides immediate support. Some resistance is at 1.1836, the previous 2021 low.”