The EURUSD pair traded lower on Tuesday, September 22. The euro fell 0.53% to 1.1708 under pressure from a spike in the number of daily COVID-19 cases of infection, with the single currency plunging in tandem with the pound sterling.

UK Prime Minister Boris Johnson announced tighter pandemic containment measures for pubs, restaurants and bars for up to six months until a vaccine becomes available. Johnson said that the country does not intend to impose a second nationwide lockdown, while schools and universities will continue to operate. He called for people to work at home if possible.

Dollar strength across the board exacerbated the downturn in EURUSD and GBPUSD pairs. The greenback moved higher after hawkish comments by Chicago Federal Reserve President Charles Evans, who said that quantitative easing should not be open-ended in nature, while QE and rate hikes should be paused before the inflation target is reached.

Fed Chairman Jerome Powell, in turn, noted that the US banking system has been doing quite well during the pandemic, although the path forward remains uncertain, and much still needs to be done in order for the economy to recover. Powell is scheduled to address the House of Representatives on Wednesday and the Senate Banking Committee on Thursday.

Today’s macro agenda (GMT+3)

• From 10:15 to 11:30 manufacturing and services PMIs will be released in France, Germany, the Eurozone, and the UK (August)
• 11:00 Switzerland: ZEW economic sentiment index, based on ZEW and Credit Suisse data (September)
• 16:00 US: house price index (July), 16:45 manufacturing and services PMIs (September)
• 17:00 US: Fed Chairman Powell speech
• 17:30 US: EIA weekly petroleum status report

Current outlook

Today’s FX trading session can be expected to see elevated volatility due to speeches By Jerome Powell, Andrew Bailey, and Boris Johnson. Sellers have broken out of the 112^th-135^th degree area and the price action is currently drifting near the 157^th degree of the Gann angle.

A narrowing formation has formed with bullish divergence. Although we anticipated a rebound to the balance line from the 180^th degree (1.1653), the price action could rebound upward from the current level. If the markets start to take a more sanguine view about future lockdowns, the key pair could retrace to 1.1752 within the narrowing pattern. That said, if the euro bears can push EURUSD below 1.1700, this would pave the way for a drop to 1.1522 (38.2% of the growth from 1.0727 to 1.2011), whereas a rebound from the current low to the vicinity of 1.1770 could snuff out the downtrend for the next 2-3 weeks.