EUR/USD Mid-Session Technical Analysis for February 27, 2020

The Euro spiked to the upside against the U.S. Dollar on Thursday to its highest level since February 7 after the release of disappointing U.S. economic reports. This moves comes on top of strong buying throughout the week on expectations of a sooner than expected rate cut by the U.S. Federal Reserve.

At 14:45 GMT, the EUR/USD is trading 1.0984, up 0.0105 or +0.96%.

The Commerce Department said Thursday that orders for durable goods slipped 0.2% last month after climbing 2.9% in December. Excluding volatile transportation orders, durable goods orders rose 0.9%, fastest growth since April 2018.

Economists had expected a bigger drop in overall orders for durable goods, which are items such as appliances and industrial machinery meant to last at least three years.

It doesn’t matter that the Durable Goods report beat the estimate since they came in lower than the previous read. Furthermore, investors believe the number will likely be lower in February since the coronavirus has spread to the United States.

The Preliminary GDP reading of 2.1% is also useless since it represents stale data from the fourth quarter of 2019. We are confident that U.S. GDP will take a hit in the first quarter of 2020.

Traders are pricing in rate cuts from both the Fed and the European Central Bank (ECB). Some think this is offsetting news, but it isn’t. Since U.S. rates are much higher than Euro Zone rates, a 25 basis point rate cut in the U.S. will have a much greater impact on the U.S. Dollar than a 0.10% rate cut by the ECB will have on the Euro.

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has shifted to the upside. The main trend will change to up on a move through the last main top at 1.1095. A trade through 1.0778 will signal a resumption of the downtrend.

The minor trend is up. It was reaffirmed earlier today when buyers took out 1.0926. This move added to the surge in momentum.

The main range is 1.1095 to 1.0778. Its retracement zone at 1.0937 to 1.0974 is currently being straddled. Trader reaction to this zone will set the tone for the rest of the session.

Daily Technical Forecast

Based on the early price action and the current price at 1.0984, the direction of the EUR/USD the rest of the session on Thursday is likely to be determined by trader reaction to the Fibonacci level at 1.0974.

Bullish Scenario

A sustained move over 1.0974 will indicate the presence of buyers. If this move generates enough upside momentum, we could see the rally extend into downtrending Gann angles at 1.1000, 1.1023 and 1.1034.

Bearish Scenario

A sustained move under 1.0974 will signal the presence of sellers. This could trigger a break into the 50% level at 1.0937. Since the main trend is down, the sellers will be trying to establish a secondary lower top.

Taking out 1.0937 will indicate the selling pressure is getting stronger. This could eventually lead to a test of the nearest uptrending support angle at 1.0878.