08.07.202009:23 Forex Analysis & Reviews: EUR/USD: Which is more important - a more active economic recovery or the risk of a new outbreak of the coronavirus pandemic?

The euro declined due to the weak macroeconomic data on the European economy. Meanwhile, the demand for the dollar returned after the United States and other developing countries observed a surge in COVID- 19 infections.

Ever since Europe and the US opened their economies, new outbreaks of coronavirus were observed, which completely erased hopes for a V-shaped recovery. Low consumption remains the main constraint on activity, so yesterday, the European Commission revised its forecast for inflation and prospects for GDP into downward, which discouraged traders from putting short-term positions on risky assets.

Because of a sharp surge in COVID-19 infections, the global GDP is expected to decline by 3.8% in 2020, and it will take longer than expected to recover. The key problems remain on the part of low consumer confidence, which is tied to a serious decrease in the level of employment in the population, caused by the prolonged restrictive measures.

Thus, in the macroeconomic reports published yesterday, the New York Fed revealed that the economic growth indicator in the US, which calculates the pace of GDP, declined during the pandemic, and fell by 7.35% over the week from June 28 to July 4. This led to an increase in demand for the US dollar. The sharp decline in the indicator is associated with a drop in retail sales and consumer confidence.

Other data on the economic optimism index (IBD / TIPP poll) also returned demand for the US dollar, since a decrease was noted in the indicators. According to the data, the index fell to 44.0 points in July, down from its 47.0 points in June. This indicates that the country has experienced problems during the summer.

Data on retail sales also disappointed traders. According to the report published by The Retail Economist and Goldman Sachs, the US retail sales index for the week of June 28 to July 4 fell by 0.9%, while compared to the same period in 2019, it fell immediately by 10.0%. The Redbook also reported that US retail sales in the first 5 weeks of June fell 0.6% after an active surge in May amid the lifting of quarantine measures. Compared to 2019, sales decreased by 7.3%.

As for the technical picture of the EUR / USD pair, the bulls will encounter serious problems if they fail to keep the support level of 1.1265 today. Its breakdown will lead to a large sell-off of the trading instrument at lows 1.1230 and 1.1190, so the bulls need to break and consolidate above the resistance level of 1.1300 to strengthen consumer demand and bring risky assets to weekly highs in the region of 1.1350.