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- The EUR/USD retreated after the US Congress made a deal on a new stimulus package.
- The new bill will provide $900 billion to individuals, businesses, and local governments.
- Economists believe that the country needs additional support to boost recovery.
The EUR/USD price declined in early trading as traders reacted to the progress in Washington about a new stimulus deal. The pair dropped to a low of 1.2183, which is substantially lower than last week’s high of 1.2276.
US new stimulus
The United States has been the most affected country by the Covid pandemic. In total, the country has confirmed more than 17.8 million cases and more than 317,000 cases.
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This has led to more than 10 million job losses and the GDP to be substantially lower than where it was in January.
As a result, Congress has been deadlocked on how to provide more fiscal stimulus to the economy. That changed last night when congressional leaders agreed to a new $900 billion stimulus package.
The deal will include $600 direct payments to Americans. It will also provide $300 in enhanced federal unemployment benefits. Other funds will go to schools, vaccine distribution, and small business.
Also, airlines will receive about $15 billion while $25 billion will go towards rental assistance. The biggest loser will be states and local governments that are facing shortfall worth billions of dollars.
Economists believe that a new stimulus will be a good thing for the American economy as it continues its recovery process. Indeed, the Fed pressed congress to offer this support when it delivered its last interest rate decision of the year last week.
Later today, the EUR/USD will react to the latest business and consumer sentiment data released by the European Commission. In general, economists believe that these numbers will show a significant improvement in sentiment since people are optimistic about the new Covid vaccines being rolled-out.
EUR/USD technical outlook
The EUR/USD is down by more than 0.50% today after the latest stimulus offer. The price dropped to an intraday low of 1.2178, which is 0.70% below the highest point last week.
On the four-hour chart, the price has moved below the 25-period and 15-period Hull moving average (HMA). This is usually a bearish sign, as you can find in our free forex trading course.
It has also moved below the sloping upward trend that connects important lowest points in December.
Therefore, it seems like bears are prevailing, meaning that they could continue to test the important support at 1.2150 and then 1.2100. However, this forecast will be invalidated if the price manages to move above 1.2200.
