- The euro finds support at 1.1640 after a five-fay sell-off.
- COVID-19 lockdowns and the ECB have sent the euro tumbling.
- The US elections will be a key EUR/USD driver next week.
The euro extended its downtrend for the fifth consecutive day and is on track for a 1.75% weekly decline to close the week near 1.1640 with 1.1610 multi-month lows on sight.
ECB and COVID-19 lockdowns send the euro tumbling
The euro has been hammered this week by market concerns about the increase of COVID-19 infections in Europe and the effect of the social distancing measures to curb them. The new lockdowns introduced by France and Germany and the tighter limitations applied in Italy and Spain are raising the alarm about the impact on the fragile economic recovery.
Beyond that, the ECB hinted on Thursday to the possibility of unleashing new stimulus measures in December to counteract the negative impact of the pandemic, which boosted negative impact on the common currency.
On another note, the risk-averse sentiment triggered by the rise of coronavirus infections in Europe and US and the uncertainty about the outcome of US elections have favoured the safe-haven USD, which rallied to four-week highs against a basket of currencies.
Next week, the US presidential elections will be the main event. The market is pricing in a Biden’s victory that might push the USD lower, anticipating the approval of a large stimulus package by the Democrat government. A contested election, however, would increase uncertainty and boost dollar demand on a rush for safety.
Technical levels to watch
Credit: FX Street