- EUR/USD has been attempting to stabilize around the lowest since 2017.
- Economic divergence, coronavirus headlines and the FOMC Meeting Minutes await traders.
- Wednesday's four-hour chart is pointing to oversold conditions.
The "Macron Gap" has been breached – and that implies further falls for EUR/USD, even if it suffers from oversold conditions. Back in April 2017, the world's most popular currency pair leaped above the 1.0770 – 1.0820 zone over the weekend in which Emmanuel Macron won the first round of the French presidential elections before assuming office later that year.
The economic divergence between the struggling eurozone and the upbeat US economy remains the main downside driver for euro/dollar. The latest disappointing figure came from ZEW's business survey, which showed that Economic Sentiment slipped to 8.7 points, significantly worse than expected. In the US, the Empire State Manufacturing Index beat estimates with 12.9.
The coronavirus outbreak is also weighing on the common currency as Germany relies heavily on exports to China. Beijing has reported that its refineries processed 25% less oil in early 2020 than the average in the second half of 2019. Several factories remain at low utilization or shut down, causing Apple to cut its forecasts.
On the other hand, the pace of new infections has decelerated and authorities in the second-largest economy remain optimistic about a swift return to rapid growth. Nevertheless, while global stock markets have stabilized, the euro remains under pressure.
Apart from fresh developments related to the respiratory disease, markets are awaiting the Federal Open Markets Committee (FOMC) Meeting Minutes for its January meeting. The Fed left rates unchanged and made only subtle changes to its accompanying statement. Robert Kaplan, President of the Dallas branch of the Federal Reserve, has said that he supports leaving rates unchanged for longer. Bond markets have other plans for rates – foreseeing a reduction later this year.
Investors will look for any hints about changes in policy – related to the coronavirus or other factors.
See: January FOMC Minutes Preview: The economic comparisons accumulate
Kaplan and his Neel Kashkari, his colleague from the Minnesota Fed, will speak later. The US also publishes Building Permits and Housing Starts, which are set to show ongoing expansion in the construction sector.
Overall, concerns about European growth, coronavirus headlines and the Fed's minutes are eyed.
EUR/USD Technical Analysis
Euro/dollar is oversold according to the Relative Strength Index on the four-hour chart, which is just below 30 – implying a recovery. However, as recent days have shown, all upticks proved to be "dead-cat bounces" – limited and shortlived, followed by further falls.
Momentum remains to the downside and the currency pair trades below the 50, 100, and 200 Simple Moving Averages.
Support awaits at the new low of 1.0785 recorded on Tuesday, followed by 1.0770 and 1.0720 – levels seen in April 2017.
Resistance is at 1.0820, the top of the Macron Gap, and then at 1.0860, a swing high seen on Friday. The 2019 trough of 1.0880 and 1.0905 are next.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD steady below 1.0800 after US PCE meets expectations
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair barely reacted to US PCE inflation data, with the Greenback shedding some pips. Fed Chair Jerome Powell set to speak ahead of the weekly close.
GBP/USD hovers around 1.2620 in dull trading
GBP/USD trades sideways above 1.2600 amid a widespread holiday restraining action across financial markets. Investors took a long weekend ahead of critical United States employment data next week. Fed Chair Powell coming up next.
Gold price sits at all-time highs above $2,230
Gold price holds near a fresh all-time high at $2,236 in thinned trading amid the Easter Holiday. Most major world markets remain closed, although the United States published core PCE inflation, the Federal Reserve’s favorite inflation gauge.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.