Euro Price Outlook – EUR/USD Remains Weak as Covid Spread Continues to Hit Europe

Euro Price, News, and Analysis:

• Further covid-19 lockdowns will damage the region’s growth outlook.
• EUR/USD struggling below 1.2000.

The German economy is set to contract sharply in Q1 2021, according to the Bundesbank, due to ongoing lockdown measures. This follows on from last week when the German Council of Economic Experts (GCEE) predicted that German Q1 GDP would be negative 2%. ‘The greatest risk to the German economy is posed by a potential third wave of infections’ according to GCEE member Volker Wieland, and this seems to be playing out as various countries around Europe reinstate or lengthen lockdown measures. Infection rates are soaring in Germany, France, Poland, and a host of other EU member states, dampening growth prospects for 2021, despite the block’s central bank providing an unprecedented amount of liquidity. The EU’s current vaccination program remains a source of frustration with low rates of vaccination across the EU leaving the single block vulnerable to further outbreaks.

Ahead this week, important data releases include Eurozone and German PMIs on Wednesday and the latest German Ifo report on Friday. There is also a 2-day European Council meeting starting on Thursday. For all market-moving economic data and events, see the DailyFX Calendar.

EUR/USD remains stuck under 1.2000 and with various technical barriers all the up to 1.1990, it is likely to stay sub-1.2000 in the short-term. The chart shows both the 20- and 200-day simple moving averages on either side of 1.1950, while a cluster of four prior highs around 1.1990 will also weigh on the pair. A clean break and an open below 1.1836 would leave the pair vulnerable to further falls with no real identifiable levels of strong support before 1.1603.

EUR/USD Daily Price Chart (September 2020 – March 22, 2021)

IG Retail trader data show 48.82% of traders are net-long with the ratio of traders short to long at 1.05 to 1. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise.Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse lower despite the fact traders remain net-short.

What is your view on EUR/USD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.