- EUR/USD has been on the back foot amid coronavirus headlines.
- Top-tier US figures and a speech by ECB's Lagarde are eyed.
- Wednesday's four-hour chart is showing an improving picture for the bears.
Contained or not contained? That question, related to the coronavirus outbreak, is what investors are grappling with. After several upbeat days in financial markets, US stock futures are pointing lower, and bonds are in demand once again.
In past days, lower US yields resulted in a weaker dollar, a phenomenon that was best observed on Friday. However, the recent slide in returns on US treasuries is not reflected in EUR/USD. The correlation could be loosening as the greenback returns to its more classic safe-haven status.
It seems that the dollar is enjoying a win-win situation.
China has reported around 25,000 cases, and the death toll is nearing 500. A cruise ship moored off the coast of Japan has been quarantined after ten people were diagnosed with the respiratory disease. Nike, a prominent US sports company, has released warnings about income in the world's second-largest economy.
On the other hand, the World Health Organization has stressed that the disease is mostly contained in China and, more specifically, around Wuhan. Authorities began operating a new hospital in the epicenter of the outbreak – only ten days after construction began.
US politics, data, and Lagarde
The greenback is also marginally benefiting from US politics. The Democratic Party's partial results from Iowa – after a significant farce with the counting – has shown that moderate Pete Buttigieg is on top, ahead of left-leaning Bernie Sanders and Elisabeth Warren. Another centrist, former Vice President Joe Biden, was beaten, but that may open the door to Michael Bloomberg, who is not competing in the early stages. Markets prefer candidates with business-friendly policies.
President Donald Trump – who reveled in the Dems' mishaps – touted the robust US economy in his State of the Union Speech. Fresh figures will test this strength. The ADP private-sector jobs report is forecast to show an increase of 156,000 positions in January, below the substantial of 202,000 reported in December. The figure serves as a hint toward Friday's official Non-Farm Payrolls.
See ADP Employment Change Preview: Trade pact revival?
Later in the day, economists expect the ISM Non-Manufacturing Purchasing Managers' Index to remain at 55 points – reflecting robust growth. The employment component serves as another clue toward the labor market report at the end of the week.
ISM Non-Manufacturing PMI Preview: Manufacturing to the fore
The economic calendar also features a significant event in Europe. Christine Lagarde, President of the European Central Bank, delivers a speech in which she may comment on the current economic situation and the bank's strategic review.
Pablo Hernández de Cos, Governor of the Bank of Spain and Lagarde's colleague, has supported adopting a simple inflation target of 2%. The ECB is set to publish the results of its exercise by year-end.
Overall, coronavirus headlines, US data, and Lagarde's speech are set to move EUR/USD.
EUR/USD Technical Analysis
EUR/USD is battling the 50 Simple Moving Average on the four-hour chart, and upside momentum has all but vanished. The picture is worsening for the pair, but the trend is still not fully bearish, while euro/dollar sticks to recent lows at 1.1035.
Further support awaits at 1.1020, which cushioned the pair in late January, followed by the 2020 low of 1.0991. 1.0940 and 1.0925 are next.
Resistance awaits at 1.1065 that capped EUR/USD in recent days, followed by 1.1075, Friday's peak. 1.1120 and 1.1145 are next.
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