EUR/USD Mid-Session Technical Analysis for May 6, 2020

The Euro is edging lower on Wednesday after a report showed Euro Zone business activity almost ground to a halt last month as government-imposed lockdowns to stop the spread of the coronavirus forced factories to shut, shops and restaurants to close and recreational pursuits to cease, a survey showed.

IHS Markit’s final Composite Purchasing Managers’ Index (PMI) for the Euro Zone, seen as a good indicator of economic health, plummeted to 13.6 in April from March’s already dire 29.7, easily its lowest reading since the survey began in 1998.

At 12:05 GMT, the EUR/USD is trading 1.0810, down 0.0025 or -0.23%.

“The extent of the Euro Area economic downturn was laid bare by record downturns in every country surveyed in April, with output falling at unprecedented rates across the region’s manufacturing and services sectors,” said Chris Williamson, chief business economist at IHS Markit.

“With a large part of the region’s economy shut down while COVID-19 infections spiked higher, the economic data for April were inevitably going to be bad, but the scale of the decline is still shocking.”

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. The Euro turned up on May 1 when buyers took out the last swing top at 1.0991. There was very little follow-through to the upside on the move with the rally stalling at 1.1018. A trade through 1.0727 will change the main trend to down. A move through 1.1018 signals a resumption of the uptrend.

The minor trend is down. It turned down earlier today when sellers took out 1.0810. This shifted momentum to the downside.

The EUR/USD is also trading on the weak side of several retracement levels, which reaffirms the current weakness. Nearby resistance levels are at 1.0831, 1.0892, 1.0937 and 1.0987. Buyers will have to climb back over those levels before they can reach last week’s high at 1.1018.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 1.0810, the direction of the EUR/USD the rest of the session on Wednesday will be determined by trader reaction to the Fibonacci level at 1.0831.

Bearish Scenario

A sustained move under 1.0831 will indicate the presence of sellers. If this generates enough downside momentum then look for the EUR/USD to continue back toward the 1.0727 main bottom.

Bullish Scenario

A sustained move over 1.0831 will signal the return of buyers. This could lead to a test of the first 50% resistance level at 1.0892.