EUR/USD continues to drop as Eurozone’s biggest economies, France and Germany, consider imposing the economically-painful lockdown restrictions to counter the rising corona virus cases. France is reportedly considering a month-long national lockdown, which could take effect from midnight on Thursday.

While these measures look less severe than the ones implemented in April/May, they could still harm Eurozone’s already fragile economic recovery, resulting in a prolonged period of deflation. All things considered, the pressure on the European Central Bank to deliver more stimulus looks to be rising. As such, markets are offering euro’s. The sell-off will gather pace if the corona virus numbers continue to rise.

The US, too, is experiencing the second wave of corona virus. However, the Federal Reserve faces less urgency to boost stimulus as inflation expectations in the US are holding up relatively well. Coupled with expectations for additional fiscal stimulus, that is likely to support gains in the US dollar. The US fiscal largesse is positive for yields and the greenback.

President Donald Trump will hold two campaign rallies on Wednesday in the battleground state of Arizona, where polls show him narrowly trailing Democratic rival Joe Biden, as the White House race heads into its final six-day stretch. Biden, who has repeatedly criticized Trump for failing to contain the coronavirus pandemic, will receive a briefing from public health experts and deliver a speech near his home in Delaware on his plans to combat COVID-19 and protect Americans with pre-existing health conditions, his campaign said.

Biden still leads Trump comfortably in national opinion polls in a race dominated by the pandemic, which has caused more than 225,000 U.S. deaths, cost millions more their jobs, and spurred a rush to vote early by many Americans looking to avoid health risks from exposure. The race is tighter in several battleground states where the election might be decided.

EUR/USD 4 Hour Chart:

Support: 1.1778 (S1), 1.1762 (S2), 1.1732 (S3).

Resistance: 1.1825 (R1), 1.1855 (R2), 1.1871 (R3).

Amidst all the catalysts creating pressure on the Euro due to the spread of the corona virus, we expect a bearish trend for EUR/USD.