Euro vulnerable to Covid cases

The Euro continues its sideways trading pattern as we enter the European session and was last seen trading around the $1.1295 region, which is slightly higher than yesterday’s trading session but there is a lot of vulnerability lying beneath over concerns about the US federal reserve’s next moves and the spread of the Omicron variant of the coronavirus

European leaders have already issued warnings that the Omicron variant will likely become the dominant strain of Covid-19 in less than a week and deal another devastating blow to the Eurozone economy which was only just starting to get back on its feet after the 2nd wave of the coronavirus.

In the UK, the new virus is already running rampant and it once again threatens to bring the country to a standstill. New Omicron infections in the UK are coming in at around 200,000 a day, which is a much larger number than the officially confirmed cases, according to an estimate from the UK Health Security Agency.

“We expect it to overtake Delta within days, not weeks,” First minister of Scotland Nicola Sturgeon told the Washington Post.
 Also weighing on the Euro is the US Federal Reserve who are now on a trajectory path to tighten monetary policy sooner rather than later to contain stubbornly high inflation. This is a complete divergence from the European central bank who are adamant they will keep their current stimulus program in place and the spread of the coronavirus only confirms this.

Looking ahead today, the main drivers of the EUR/USD currency pair will be the release of industrial production figures from the Eurozone while in the American session we will see the release of Producer Price index figures from the US.

On the chart we can see the Euro has found strong support over the last 2 weeks at the $1.1267 mark while at the same time finding strong resistance at the $1.1342 level.

The support level is looking very shaky and the ability to hold will be dictated by the spread of the Omnicron virus and if we see anything like the current situation in the UK, the $1.1267 mark is likely to give way and we may see a move down to the next resistance level of $1.1199.