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Oct 02 - 11:55 AM

EUR/USD - COMMENT-U.S.fiscal Stimulus Might Be The Only Hope For EUR/USD Bulls

By Christopher Romano  —  Oct 02 - 10:40 AM

EUR/USD fell on Friday on news that U.S. President Donald Trump tested positive for COVID-19 and a slightly disappointing non-farm payrolls report nL1N2GT0K7, leaving the euro vulnerable to bearish sentiment unless lawmakers produce a fiscal support bill.

Safe-haven dollar and yen buying helped drive EUR/USD below the 10-day moving average.

News that euro zone inflation fell further into negative territory nL8N2GT1W7 added to the euro's woes -- buoying euribor prices, pressing Bund yields lower and widening German-U.S.
yield spreads in the dollar's favor.

Brent crude futures LCOc1 broke critical support and hit a 3-1/2-month low.
The fall increased euro zone disinflation worries, which should keep inflation expectations EUIL5YF5Y=R trending lower and expectations for additional ECB stimulus elevated.

If the U.S. Congress can agree a stimulus deal EUR/USD's rally might resume.
House Speaker Nancy Pelosi said that Trump's diagnosis changed the dynamic of relief negotiations nL1N2GT0NZ.
Risk rallied on the statement and EUR/USD bounced slightly.

For now, though, EUR/USD looks likely to drop, and bearish technicals like falling monthly and daily RSIs bolster that view.

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Refinitiv IFR Research/Market Commentary


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