EUR/USD Daily Forecast – Dollar Bulls Encouraged By Fiscal Stimulus Prospects

It was a volatile start to the week but the markets have settled as President Trump shifted to a proactive stance towards the Coronavirus.

Trump, who had previously been criticized by media outlets for taking a relaxed view towards the virus, said in a speech yesterday that he will discuss payroll tax cuts with congress to soften the economic blow from the Coronavirus. Further, he intends to provide relief to any pay disruptions for hourly wage workers.

The markets have responded positively in pre-market trading with the S&P 500 recovering more than half of yesterday’s nearly 8% drop. The greenback has recovered a bulk of yesterday’s decline against a basket of currencies while gold prices turned to negative territory for the week after breaking to a fresh seven-year high yesterday.

Trump is expected to provide details in a press conference later today and the markets stand to continue pricing in optimism ahead of it.

EUR/USD rallied to highs not seen in over a year yesterday but has reversed a bulk of the gain after sellers stepped in slightly ahead of the 1.1500 level.

There is some euro data in the early day, but investors are likely to continue focusing on direction from government officials and central bankers on how they plan on dealing with the Coronavirus.

Technical Analysis

Yesterday’s rally in EUR/USD was capped at two notable horizontal levels. The first is the psychological 1.1500 handle which held the price lower on an intraday basis.

The second level of interest falls at 1.1446 which is a level that was well-respected on a weekly chart between 2015 and 2016. EUR/USD held below this level on a daily close basis.

Today’s close will be important as the pair is on pace to post a reversal candlestick. This may signal a near-term top, especially since EUR/USD entered overbought territory on the rally yesterday.

Comments from Trump will be important. The markets will want to see a commitment from the government to confirm that all the weight of easing the economic fallout from the virus is not left to the Federal Reserve alone.

The next level of interest to the downside falls at 1.1285 which reflects Friday’s close. A decline to the level would serve to close the gap from this week’s open.

Bottom Line

• EUR/USD has reversed lower as Trump’s hint of fiscal stimulus has triggered a shift in risk sentiment.
• Trump will hold a press conference later today, risk appetite stands to remain in the markets until then at the very least.