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EUR/USD Slides Germany Cannot Rule Out Possible Lockdown on Covid Surge

EUR/USD Slides Germany Cannot Rule Out Possible Lockdown on Covid Surge

Justin McQueen,

EUR/USD Analysis and News

  • Euro Bias Remains Selling on Rallies
  • Austria Announces Lockdown, German Health Authorities Cannot Rule Out Lockdown

After a brief reprieve, which largely stemmed from the unwind in Euro funded EM carry trades in ZAR and TRY, the currency is once again on the back foot with the bias remaining to sell rallies. That being said, support in EUR/USD at 1.1290-1.1300 is vulnerable to a break. To add to this, markets are still on the lookout for the announcement of President Biden’s Fed Chair pick and thus market participants with exposure to the Euro are likely to remain agile.

Volatility Spike in EM FX Following Turkish Rate Decision

Source: Refinitiv

Regarding the Fed Chair pick, bookmakers still favour Powell’s reappointment, however, Brainard has closed the gap in recent weeks. Should Brainard get the nod, expect an initial kneejerk reaction with USD lower, gold and equities higher on the perception that Brainard is more dovish than Powell. However, the initial market reaction is likely to be faded rather quickly, given that whoever is at the helm is unlikely to alter the direction of Fed policy.

Elsewhere, a surge in Covid cases is another factor weighing on the Euro as parts of Europe respond by renewing restrictive measures with Austria announcing a hard 20-day lockdown from next week. The concern of course, is the spread of the virus to neighbouring countries, particularly now that the German Health Authorities cannot rule out another lockdown.

EUR/USD Chart: Daily Time Frame

Source: Refinitiv

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.