The EUR/USD is heading into its second month in the red as traders worry about the rising Covid cases.
The ECB hinted at further stimulus at its December meeting.
Today’s data showed that the EU economy grew by 12% in Q3, less than the U.S. economy grew by 33%.
The EUR/USD pair is in the red for the second consecutive quarter as traders worry about the upcoming U.S. elections and the rising number of Covid 19 cases. Today, little has changed in the pair as traders respond to strong economic data from the U.S. and the decision by the European Central Bank (ECB).
EUR/USD Falls Following ECB Decision
ECB prepares further incentives
The Eurozone economy is in trouble as the number of Covid cases continues to rise in most countries. Yesterday, German health authorities confirmed a record 16,700 new cases, bringing the total to over 498,000.
The same trend continued in France, where the country confirmed more than 47,000 cases, and in Spain, where they confirmed more than 23,000 new cases. Other countries such as Belgium and Portugal also confirmed more cases. As a result, most countries have started to implement some blocking measures that will have an impact on the block’s economy.
Against this background, the ECB held and concluded its meeting yesterday. As we expected, the bank left interest rates unchanged at -0.5%. It also left the target of its policy of quantitative easing unchanged at EUR 1.35 trillion.
In a press conference, Christine Lagarde said in particular that the Bank had committed itself to supporting the economy by stimulating it. The additional stimulus could come in the December meeting of the bank. She also said that the Bank’s policy makers would closely examine the available options. Analysts believe that these options could include steering yield curves, buying additional assets and even lower interest rates. She said:
“The economic recovery in the eurozone is losing momentum faster than expected. We agreed that it is necessary to take action and therefore recalibrate our instruments at our next Governing Council meeting”.
EU GDP grew in the 3rd quarter, but inflation is subdued
The EUR/USD currency pair is also reacting to the development of the European economy in the third quarter. According to Eurostat, the region’s economy grew by 12.3% in the third quarter, a better performance than the 11.5% decline in the second quarter. Nevertheless, the economy in 2019 is 4.3% lower than in the same period.
Among the best performing countries in the quarter were France, Spain and Italy, whose economies expanded by 18.2%, 16.7% and 16.1% respectively. The German economy grew by only 8.2%. Unfortunately, the top performers were also among the countries most affected by the second wave.
At the same time, the European economy is also going through a period of low inflation. The preliminary consumer price index fell in October at an annual rate of 0.3%. The core consumer price index rose by only 0.2%.
Technical Outlook EUR/USD
Technical Analysis EUR/USD
On the four-hour chart, we can see that the EUR/USD exchange rate has remained unchanged today. It is trading at the 1.1668 level, a few pips above yesterday’s low of 1.1653. The price is below the 23.6% Fibonacci retracement level. It is also below the 25-day and 15-day exponential moving averages. It is also between the first and second support levels of the Andrews pitchfork. Therefore, I expect the pair to finish the month in the current range. Start your trading journey with our free forex trading courses.