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EUR/USD Forecast: Broke Below A Critical Fibonacci Support Level, Bearish Below 1.1050

Valeria Bednarik - Chief Analyst at FXStreet

EUR/USD Current Price: 1.1006

  • The US government announced a massive relief package to fight the coronavirus crisis.
  • Data both shores of the Atlantic missed the market’s expectations, fueling growth-related concerns.
  • EUR/USD broke below a critical Fibonacci support level, bearish below 1.1050.

The American dollar has edged firmly higher against all of its major rivals this Tuesday, in another tense journey fulled of growth concerns and governments taking measures to palliate the coronavirus crisis. The US Federal Reserve announced plans to relaunch the Commercial Paper Funding Facility that was used during the 2007-2009 financial crisis to inject liquidity into the markets. Later in the day, US Secretary of the Treasury, Steven Mnuchin, urged the Senate to approve the bill passed by the House to deal with the coronavirus, while announcing a  new package of roughly $850 billion on relief aid. In a joint press conference with US President Trump, Mnuchin referred to possibly deferring corporate tax payments and sending checks to workers, adding that the government favours keeping markets open, although may need to shorten trading hours. Wall Street and government yields recovered with the news.

The German March ZEW Survey showed that Economic Sentiment collapsed to -49.5 in the Union, and  -49.5 in Germany. The assessment of the current situation in the country came in at -43.1, all of them much worse than anticipated. In the US, February Retail Sales resulted worse than anticipated, down in the month 0.5%, while the core reading printed 0.0% vs the expected 0.4%. Industrial Production in February increased by 0.6% while Capacity Utilization increase by less than expected to 77%.

This Wednesday, the Union will publish February inflation figures, while the US will unveil Building Permits and Housing Starts for the same month. None is expected to have much impact on price action.

EUR/USD Short-Term Technical Outlook

The EUR/USD pair has recovered above the 1.1000 level, but it’s at risk of extending its slump, as it has broken below the 61.8% retracement of its February/March rally at 1.1050.  In the 4-hour chart, the pair is below all of its moving averages, with a bearish 20 SMA about to cross below the 100 SMA, both in the 1.1130 region. Technical indicators have recovered unevenly from oversold readings, but remain within negative levels, indicating the absence of buying interest. The pair could retest the year low at 1.0770 on a steady decline below 1.0950, now the immediate support.

Support levels: 1.0950 1.0920 1.0880

Resistance levels: 1.1015 1.1050 1.1090

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