EUR/USD Forecast: Like the coronavirus, It will probably get worse before it gets better

EUR/USD has been extending its decline as the coronavirus story grips the headlines.
Speculation about the ECB's upcoming decision is set to dominate trading.
Wednesday's four-hour chart is pointing to further declines.

Yohay Elam FXStreet

Euro bears are spreading like the coronavirus disease – EUR/USD is on the back foot, shrugging off developments that should have pushed it higher.

The coronavirus has reached the US and financial markets took note. The safe-haven US dollar advanced on Tuesday but has pared these gains after Chinese authorities laid out a raft of measures to control the outbreak.

Nevertheless, some fear that the worst is still ahead, as travel ahead of the Chinese New Year could spread the virus quickly. It seems that EUR/USD is seeing the glass half empty rather than half full.

The common currency also seems to have forgotten the most recent economic figure coming out of the old continent. The German ZEW Economic Sentiment beat expectations with a score of 15 in January, showing that businesses are more upbeat about the prospects of Europe's largest economy.

ECB awaited

Investors are eagerly waiting for the European Central Bank on Thursday, and that may explain the caution in which they treat the euro. The ECB is unlikely to change its policy, but President Christine Lagarde and her colleagues will provide a fresh assessment of the economic situation.

Given her comments before assuming the current role, there is a chance that Lagarde may – like euro traders in recent days – see only the negatives. Nevertheless, there are reasons to be cheerful, or at least cautiously optimistic. Inflation is stabilizing, trade tensions are easing, and Europe may be gradually ready to open its purse strings.

See ECB Preview: Glass half green or a Lagarde drag on EUR/USD? Three scenarios

In Wednesday's trading, it seems that pessimism has a strong grip. After failing to ride higher on upbeat developments, the world's most popular currency pair may have more room to fall and hit new 2020 lows. Things may change on Thursday, but that is another day.

EUR/USD technical analysis

Euro/dollar is trading below the 50, 100, and 200 Simple Moving Averages on the four-hour chart. Momentum remains to the downside while the Relative Strength Index is still above 30 – outside oversold conditions.

Bears remain in control.

Support awaits at the daily low of 1.1075, followed by the holiday season trough of 1.1065. Next, we find 1.1040, which provided support in early December, and 1.0985.

Resistance is at 1.1105, a swing low from last week, followed by 1.1120, Tuesday's high. Next, we find 1.1145 and 1.1175.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

AUD/USD rises to 0.6950 as USD slips on Fed's Warsh

AUD/USD regains traction and extends the bounce toward 0.6950 in the Asian session on Friday. Fed Chair Warsh's comments reinforce the selling pressure on the US Dollar, allowing the pair to stretch higher. Warsh said that he remains committed to delivering price stability without giving away anything on future interest rate path.

USD/JPY falls in symc with USD, gives up 158.00 after Warsh's speech

USD/JPY has come under fresh selling pressure and gives up 158.00 in the Asian session on Friday amid the emergence of fresh US Dollar selling. Fed Chair Warsh's non-committal commentary on the future tightening path, weighs on the US Dollar and the pair.

Gold looks vacillating above $4,150

Gold alternates gains with losses below the key $4,200 mark per troy ounce on Friday. The yellow metal’s irresolute price action comes in response to a modest pullback in the US Dollar and a tepid recovery in US Treasury yields across the board.

Bitcoin steadies at $82,000: The five forces crushing the Uptober rally

Crypto markets have remained under pressure so far in October, with Bitcoin (BTC) sliding below $80,000 earlier this week before recovering to around $82,000 on Friday, as macroeconomic headwinds and cooling demand weigh on the market.

The Fed just got a second hot inflation number. Here's what the diesel signal is really saying

The Federal Reserve (Fed) faces a renewed inflation challenge after two consecutive reports showed price pressure intensifying across the US economy. September's Consumer Price Index (CPI) confirmed accelerating consumer inflation, while the Producer Price Index (PPI) revealed an even sharper rise in business costs. Behind both reports lies a common factor: energy prices.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff

Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.