- EUR/USD has completed a 500-pip rally from the lows amid coronavirus fears.
- Further virus news, central bank speculation, and US Non-Farm Payrolls are all eyed.
- Friday's four-hour chart is pointing to overbought conditions.
If coronavirus can make it there, it can make it anywhere, New York, New York – paraphrasing Frank Sinatra's words, the spread of the disease to NYC has had a profound impact on markets and the dollar's weakness has already sent EUR/USD to 1.1278, which is 501 pips below the trough in mid-February.
Thousands of people are reportedly quarantined in the world's financial capital. Moreover, the US is lagging behind in testing for the disease, and many fear that the number of cases in the world's largest economy will leap.
President Donald Trump has finally acknowledged that the US will suffer economically from the disease after expressing doubts earlier. Vice President Mike Pence – who Trump nominated to concentrate coronavirus efforts – has admitted not enough testing kits are available.
Stocks have tumbled down on Thursday and investors fled from stocks into the safety of bonds, pushing the ten-year benchmark treasury yield down to 0.80%. Markets are now pricing in a 100% chance of another rate cut by the Federal Reserve on March 18 – of an additional 50 basis points. The Fed's unscheduled reduction of borrowing costs on Tuesday continues weighing on the greenback.
The disease also continues spreading in Europe with Italy confirming 148 deaths and Germany's infection rate surpassing 500. Italy's decision to close schools and universities through March 15 weighed on the euro earlier this week but is now forgotten as the focus shifts to the US.
The US Non-Farm Payrolls report – usually a massive market-mover – is likely to have only a temporary impact as coronavirus news hogs the headlines. Nevertheless, it may influence the Federal Reserve's upcoming decision.
Economists expect an increase of 175,000 jobs in February – a healthy figure despite falling short of January's 225,000 gain. Annual wage growth carries expectations for deceleration from 3.1% to 3%, also a satisfactory outcome.
- US Non-Farm Payrolls February Preview: The first facts
- Non-Farm Payrolls: Greenback comeback or cementing a second double Fed cut? Three scenarios
Overall, coronavirus updates are set to be left, right, and center, with a brief interlude for the NFP.
EUR/USD Technical Analysis
The Relative Strength Index on the four-hour chart has topped 70 once again, indicating overbought conditions 0 and implying a correction. Such a downward move would likely be temporary as EUR/USD is trading above the 50, 100, and 1200 Simple Moving Averages and momentum remains positive.
Initial resistance awaits at the daily high of 1.1280, followed by 1.1320 and 1.1390 – levels last seen in the summer.
Support is at 1.1215, a swing high from earlier this week, followed by 1.1180, a level that capped EUR/USD before and after this swing move. 1.1120 provided support this week and 1.11 is a double bottom.
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