BUZZ-COMMENT-EUR/USD vulnerable as lockdowns follow COVID-19 spike

Credit: REUTERS/DADO RUVIC

The euro has come under pressure early Wednesday and might be ready to embark on a trend lower, as the surge in coronavirus infections across Europe threatens to derail any chance of an economic recovery. The selling in Asia followed reports France is mulling a one month lockdown as the spike in coronavirus infections shows no signs of letting up [nL1N2HI307] [nL1N2HH1WF].

Oct 28 (Reuters) - The euro has come under pressure early Wednesday and might be ready to embark on a trend lower, as the surge in coronavirus infections across Europe threatens to derail any chance of an economic recovery. The selling in Asia followed reports France is mulling a one month lockdown as the spike in coronavirus infections shows no signs of letting up .

Reports yesterday indicated that Germany was also contemplating a measured lockdown, as the German health system nears breaking point . With Europe's two largest economies on the verge of locking down and inhibiting economic activity, the European Central Bank may be forced to ramp up programmes aimed at supporting the euro zone economy.

The ECB meets Thursday and are expected to remain on hold, but the latest developments in the fight against the pandemic will likely convince the bank to strike an unambiguously dovish tone and set the stage for more easing measures by the end of 2020 .

The market will have to price in more ECB action and this is likely to weigh on EUR/USD. The pair is holding around the 21-day moving average at 1.1776, with more support at a rising trendline at 1.1740. A break below 1.1740 initially targets the double-bottom at 1.1680/85.

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(John Noonan is a Reuters market analyst. The views expressed are his own)

((john.noonan@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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