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James Hyerczyk

The Euro is edging higher against the U.S. Dollar on Wednesday, but not because the Euro Zone economy is expected to outperform. It’s likely because of the easing of liquidity issues following the unprecedented move by the Federal Reserve to support credit markets with unlimited asset buying, and the announcement of a $2 trillion stimulus package by the U.S. Senate.

At 10:52 GMT, the EUR/USD is trading 1.0812, up 0.0015 or +0.14%.

In other news, European Central Bank (ECB) chief Christine Lagarde asked Euro Zone finance ministers at a videoconference on Tuesday evening to seriously consider a one-off joint debt issue of “coronabonds” to help fight the epidemic, two officials said.

Additionally, German business morale tumbled in March to its lowest level since 2009, a survey showed on Wednesday, suggesting that Europe’s largest economy is heading toward recession due to the impact of the coronavirus.

The Ifo Institute said final results from its March survey showed that its business climate index slumped to 86.1 from 96.0 in February.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.0636 will signal a resumption of the downtrend. The main trend will remain down until buyers can take out 1.1496.

The short-term range is 1.1496 to 1.0636. Its retracement zone at 1.066 to 1.1167 is the primary upside target.


Daily Technical Forecast

Based on the early price action and the current price at 1.0812, the direction of the EUR/USD the rest of the session on Wednesday is likely to be determined by trader reaction to the steep uptrending Gann angle at 1.0796.

Bullish Scenario

A sustained move over 1.0796 will indicate the presence of buyers. If this move can generate enough upside momentum then we could see the move extend into the downtrending Gann angle at 1.1016. Since the main trend is down, sellers are likely to come in on a test of this angle.

Bearish Scenario

A sustained move under 1.0796 will signal the presence of sellers. This could lead to a test of a pair of uptrending Gann angles at 1.0716 and 1.0676. The latter is the last potential support angle before the 1.0636 main bottom.

Side Notes

Given the German morale numbers, it’s hard to build a case for a Euro rally. If we do see a rally, it will likely be fueled by a weaker U.S. Dollar rather than a stronger Euro. The dollar could weaken if liquidity issues start to subside as the Fed money starts to circulate through the system.

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