The Euro is facing another big selloff as we enter the European session over fears that the new coronavirus wave may spread throughout Europe and send the whole Eurozone in to another lockdown.
From Today, Austria will enter a full lockdown, while Germany will introduce tough restrictions for the unvaccinated and should that fail to work, they to will be forced into a full lockdown.
This is a big blow for the European economy just as it was getting on its feet after what was believed to be the worst of Covid 19, and some are now questioning how the economy will pull through this latest wave.
"There are question marks over the resilience of Europe and the European economy, exacerbated by protests and infection rates seen over the weekend," said Rodrigo Catril, a strategist at National Australia Bank in Sydney.
"It's hard to see the U.S. dollar coming to any harm against that backdrop," Mr Catril added.
On top of the coronavirus problems surrounding Europe, the US Federal Reserve is set to lift interest rates in the first half of next year while the European Central Bank board members have repeatedly emphasized to the market that there will be no rate hikes next year.
The FOMC Minutes due out later this week ids now of vital importance and investors will be focused on the clarity of the Fed’s rate hike timings and the central bank’s tapering pace.
Looking ahead today, we may see some movement in the EUR/USD currency pair with the release of consumer confidence figures from the Eurozone but more than likely the market will be focused on the latest coronavirus outbreak for any changes.
We can see on the chart as we enter the European session, the Euro has once again pulled back to the crucial $1.1263 support level and so far, the bulls are defending this mark.
As long as there is no new major news regarding an increase in coronavirus cases this support level should remain intact and the EUR/USD currency y pair is expected to trade sideways while the traders await the more important news tomorrow such as the Markit services and manufacturing figures from the Eurozone and the US.