Market Overview

EUR/USD Forecast: Peaked At 1.0887 But Settled Below 1.0800 With A Limited Bullish Potential

EUR/USD Forecast: Peaked At 1.0887 But Settled Below 1.0800 With A Limited Bullish Potential

EUR/USD Current Price: 1.0746

  • European and US data indicated a steep contraction in March, particularly in the services sector.
  • US Senators working on an agreement over a massive fiscal stimulus package.
  • EUR/USD peaked at 1.0887 but settled below 1.0800 with a limited bullish potential.

The EUR/USD pair is up for a second consecutive day, although off daily highs. The pair peaked at 1.0887 ahead of the US opening, as market players turned their back on the greenback and rushed back into high-yielding assets. Equities soared, with European major indexes up roughly 7.0% each. Data came in much worse than anticipated, yet the market was already prepared for it.

According to Markit, the EU economy “suffered an unprecedented collapse in business activity in March as the coronavirus outbreak intensified.”  The Services PMI in the Union plummeted to 28.4, the lowest on record, while manufacturing output was down from 48.7 to 39.5, registering the largest monthly contraction of production since April 2009 German figures were quite alike, with the preliminary estimate of the Services PMI at 34.5 and manufacturing output down to 45.7. US figures were quite alike. The manufacturing output contracted to 49.2, better than the 42.8 expected, although services activity plummeted, with the index down to 39.1 from 49.4 previously. New Home Sales in February were down by 4.4%.

Equities were the best performers with European and American indexes soaring. Whether this rally is sustainable in time, is something yet to be seen. Treasury yields also advanced, as investors are hopeful US Senators will come to an agreement over a massive fiscal stimulus package to counter the coronavirus effects on the economy. This Wednesday, Germany will release the March IFO survey, with preliminary data already out, while the US will publish February Durable Goods Orders.

EUR/USD short-term technical outlook

The EUR/USD pair eased from the mentioned high to settle around 1.0750, below the 23.6% retracement of its latest daily slump at 1.0840. The bullish potential seems still limited, as the pair would need to advance past 1.0900 to shrug off its negative stance. In the 4-hour the pair is above its 20 SMA, which lost its bearish strength, although still far below the larger ones. Technical indicators have turned neutral, with the Momentum barely bouncing from its mid-line and the RSI directionless at around 46.

Support levels: 1.0725 1.0670 1.0630

Resistance levels: 1.0800 1.0840 1.0885

Image sourced by Pixabay


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