EUR/USD Analysis: Overnight upsurge pauses near 1.10 mark, support-turned-resistance

• Coronavirus fears-led rout in equities remains a key theme in the financial markets.
• Collapsing US bond yields, Fed rate cut speculations continued to weigh on the USD.
• Persistent USD selling triggered a strong intraday EUR/USD rally to three-week tops.

Following the previous day's directionless/range-bound trading action, the EUR/USD pair caught some aggressive bids on Thursday and built on its recent rebound from near three-year lows set on February 20. The shared currency remained supported by hopes that Germany's Finance Minister will ease fiscal spending restrictions in order to help local governments and boost its flagging economy. This coupled with the ongoing sharp led down in the US dollar further fueled the pair's strong intraday upsurge of over 125 pips to the highest level in three weeks.

Fears over the global outbreak of the deadly coronavirus and its economic impact on the world economy continue to be the main theme in the financial markets. The brutal selling in equities kept fuelling the demand for traditional safe-haven assets and forced the US Treasury bond yields to collapse to fresh record lows.  The downward spiral in the US bond yields accelerated further on the back of speculations that the Fed will cut interest rates to offset the impact of a spreading coronavirus. The eventually led to broad-based USD selling, which remained unabated following the release of mostly in line US GDP growth figures for the fourth quarter of 2019. Even better-than-expected US Durable Goods Orders data for January did little to provide any respite to the USD bulls.

The intraday positive move tool along some short-term trading stops placed near the 1.0900-1.0910 region and lifted the pair to levels just above the key 1.1000 psychological mark. The pair now seems to have entered a bullish consolidation phase and was seen oscillating in a narrow trading band, just below the mentioned handle through the Asian session on Friday. Market participants now look forward to the prelim German consumer inflation figures for some impetus. Later during the early North-American session, the US economic docket – featuring the release of Personal Income/Spending data, Core PCE Price Index and Chicago PMI – might further contribute towards producing some meaningful trading opportunities on the last day of the week.

Short-term technical outlook

From a technical perspective, the overnight upsurge stalled near a previous strong horizontal support now turned resistance, which should act as a key pivotal point for short-term traders. Some follow-through buying, leading to a subsequent strength beyond 50-day SMA – around the 1.1025 region – might further fuel the momentum and assist the pair to aim towards reclaiming the 1.1200 round-figure mark.

On the flip side, any meaningful pullback might attract some dip-buying near mid-1.0900s and help limit the downside. Further down, the 1.0900 mark now becomes a strong base, which if broken might negate prospects for any further recovery and turn the pair vulnerable to resume its well-established bearish trajectory.