EUR/USD Forecast: Bears cannot be fooled as big bulk of bad news points to fresh falls

Did April Fool’s Day happen on March 31? The last day of the first quarter saw high volatility to end a turbulent period. It may have fooled some investors trying to grasp the price action, but after that choppy trading, the dust has settled. And now, EUR/USD has no reason to continue the uptrend as almost everything is pointing lower.

Euro gloom and political squabbling

The number of new coronavirus cases has stabilized around 4,000 in Italy – but that is where the good news end. Spain has seen an increase in both deaths and infections and is catching up with its southern European neighbor. France, the eurozone’s second-largest economy, has also seen a considerable rise to over 50,000, with its death toll surpassing China’s.

The disease is also infecting relations within the bloc. France, Italy, Spain, and around a dozen additional euro area countries are demanding “corona-bonds” – a debt-sharing scheme while Germany, the Netherlands, and other countries remain opposed. The lack of unity in the European Union is weighing on the common currency.

Spain publishes new figures during the morning and Italy's statistics are due out in the afternoon.

US gloom may be dollar-positive

In the US, there are no reasons to be cheerful either. However, after the end-of-quarter storm passed, the greenback has room to gain ground on safe-haven flows while stocks suffer.

The number of Covid-19 infections in the world’s largest economy is near 190,000 and the death toll is above 4,500. While New York remains the epicenter, other hotspots are popping up.

President Donald Trump has said that two “very painful” weeks await the country, with estimates ranging from 100,000 to 240,000 deaths. Consumers are also worried, with the Conference Board’s Consumer Confidence gauge for March falling from 130.5 to 120, albeit above expectations.

Two significant statistics await traders today. Economists expect ADP’s labor market report to show a loss of 150,000 private sector positions – erasing most of February’s gains. While the correlation with Friday’s official jobs is often missing, the publication is set to rock markets.

See ADP Non-Farm Payrolls Preview: The job onslaught begins

Later on, the ISM Manufacturing Purchasing Managers’ Index will provide a snapshot of the sector. Investors brace for a relatively moderate fall from 50.1 to 45 points – within contraction territory, but not an outright plunge. The employment component carries expectations for a similar figure, and it serves as a hint toward Friday’s Non-Farm Payrolls.

See ISM Manufacturing PMI Preview: Markets return first, factories second?

Overall, coronavirus headlines, economic data, and also politics are likely to move euro/dollar.

EUR/USD Technical Analysis

Momentum on the four-hour chart has turned negative after several positive days – a bearish sing. On the other hand, EUR/USD has topped the 100 and 200 Simple Moving Averages, but only just. All in all, the picture is mixed.

Resistance awaits at 1.1050, which has separated ranges in mid-March. It is followed by 1.1090, a temporary cap on the way up, and then 1.1150, the late-March peak.

Some support awaits at 1.10, the confluence of the 100 and 200 SMA. The next cushion is at 1.0930, Tuesday’s low, and then 1.0890, a temporary peak on the way up.