The EUR/USD pair remained under pressure and is trading just a few pips above a 16-month low touched on Friday, in the Asian session.

A number of factors combine together to underpin the bearish trend of the pair, although the oversold conditions kept away the traders from placing new bearish bets.

The greenback is favored by the traders due to early policy tightening by the Fed and was further supported by fresh COVID-19 worries.

Austria becomes the first country in Western Europe to impose a full COVID-19 lockdown from Monday. The rising numbers of COVID-19 cases resulted in a full lockdown in Austria.

German Health Minister Jens Spahn called the situation in the country a national emergency, adding that vaccinations alone will not reduce the numbers.

On the other hand, Traders are betting that the US central bank would be forced to adopt a more aggressive policy response to contain stubbornly high inflationary pressures. Additionally, US Federal Reserve Governor Christopher Waller has urged the central bank to speed up the pace of tapering asset purchases in response to the surging inflation.

Waller said that “To me, the inflation data are starting to look a lot more like a big snowfall that will stay on the ground for a while, and that development is affecting my expectations of the level of monetary accommodation that is needed going forward.”

Moreover, Fed Vice Chairman Richard Clarida and Governor Christopher Waller on Friday suggested that faster asset tapering could be appropriate as economic recovery quickens and inflation rises. This could also mean earlier interest rate hikes.

EUR/USD 4 Hour Chart:

Support: 1.1229 (S1), 1.1178 (S2), 1.1106 (S3).

Resistance: 1.1352 (R1), 1.1424 (R2), 1.1475 (R3).

The speculation on early policy tightening by the Fed and Covid woes favors the US dollar and weighs on the Euro; we expect a bearish trend for EUR/USD.