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EUR/USD Forecast: Bears await a sustained break below 1.1055-50 confluence support

  • EUR/USD remained depressed on Friday and retested weekly lows, near the 1.1055 area.
  • The Fed slashed interest rates to zero and introduce fresh QE to boost economic growth.
  • The pair gained some traction, albeit faced rejection near the 1.1200 round-figure mark.

The EUR/USD pair witnessed some follow-through selling on the last trading day of the week and dropped back to test the 1.1050 support area, or near two-week lows set in the previous session. As investors digested the Fed's move on Thursday, to inject $1.5 trillion into the financial system, the US dollar maintained its strong bid tone and was seen as one of the key factors that kept exerting some pressure on the major. The greenback remained well supported by its status as the global reserve currency amid mounting fears about the economic impact of the coronavirus pandemic.

The pair settled near the lower end of its weekly trading range but once again showed some resilience below the very important 200-day SMA. The pair caught some fresh bids on the first day of a new trading week and rallied back to the 1.1200 round-figure mark following the Fed's emergency decision to slash its benchmark interest rates to zero. The US central bank also announced a fresh round of quantitative easing and pledged to restart buying a total of $700 billion in US Treasuries/mortgage-backed securities to shore up economic growth.

The Fed latest decision triggered a fresh leg down in the US Treasury bond yields and weighed heavily on the buck, assisting the pair to snap four consecutive days of losing streak. The pair, however, failed to capitalize on the momentum, rather faced rejection near the 1.1200 round-figure mark and now seems to have stabilized around the 1.1130-25 region. It will now be interesting to see if investors are convinced that the Fed's stimulus efforts are good enough to offset the negative impact of the coronavirus outbreak, which will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus.

Short-term technical outlook

From a technical perspective, the pair has been finding decent support near confluence support comprising of 100-day SMA and 61.8% Fibonacci level of the 1.0778-1.1335 recent upsurge, which should now act as a key pivotal point for short-term traders. A convincing break below will negate prospects for any further positive move and turn the pair vulnerable to accelerate the slide towards challenging the key 1.10 psychological mark. Some follow-through selling has the potential to drag the pair further towards 1.0900 round-figure mark en-route the next major support near the 1.0835 horizontal zone.

On the flip side, the 1.1200 round-figure mark now seems to have emerged as an immediate strong resistance, which is closely followed by resistance near the 1.1235 region. A sustained move above the mentioned barriers should assist the pair to surpass the 1.1300 round figure mark and test 23.6% Fibo. level, around the 1.1325 region. A subsequent strength seems more likely to set the stage for the resumption of the pair’s recent strong bullish trajectory back.

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Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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