The current growth of the euro/dollar is still corrective.
Hello, dear colleagues!
Today’s review of the main EUR/USD currency pair will start with the economic reports that came from Germany yesterday. All three IFO business climate, expectations, and current conditions indices were worse than forecast. According to some economists, due to the impact of COVID-19, the German economy may miss about 20%, and this will inevitably lead to a recession in the region. Let me remind you that Germany is the economic locomotive of the eurozone. If German business continues its decline, the crisis will not be avoided.
Meanwhile, the President of the European Central Bank (ECB), Christine Lagarde, has taken the initiative to consider a one-time issue of “coronabonds”. The goal is still the same – to limit the impact of the pandemic on the eurozone economy.
In the United States, they are also not sitting idly by, and are trying to counter the impact of COVID-19 on the American economy. The US Senate is debating a bill to expand insurance for the unemployed, as well as limit the $500 billion fund for multinational corporations. However, US senators have not yet come to a consensus and the debate on this topic continues.
Let me remind you that earlier, US President Donald Trump, together with senators, adopted an agreement on stimulus measures in the amount of $2 trillion to support the American economy. It is characteristic that some experts assume a strong outbreak of coronavirus in the United States, so the White House administration is seriously concerned about such forecasts and is trying to take action on the impact of COVID-19. Trump himself, on the eve of the presidential election, said that it is extremely important to prevent an outbreak of a new type of coronavirus in the country, otherwise, his re-election to a second term will be in great doubt. There is no doubt that if the United States is overwhelmed by a wave of pandemics, the Democrats will release all the dogs on the current President. The moment for this will be more than appropriate.
If we look at today’s economic calendar, we will not see any significant data from the eurozone. From the US reports, it is worth paying attention to the initial applications for unemployment benefits, as well as to the final GDP data for the fourth quarter.
Now we turn to the technical picture of the main currency pair of the Forex market, which has seen significant changes.
As you can see, at yesterday’s trading, the pair came close to the resistance level of 1.0887, and even tried to break through it, but the euro bulls did not have enough strength for this.
But today, at the moment of writing, the euro/dollar is trading near 1.0934. Right now, the Tenkan line and the lower border of the Ichimoku indicator cloud are being tested for an upward breakout.
In my opinion, this is a very important and significant moment. If today’s trading ends within the cloud, there will be technical prerequisites for further promotion of the quote in the north direction. With this development, EUR/USD will head towards the landmark psychological and technical level of 1.1000, just below which is the 50 simple moving average.
It is likely that the current course of trading will be influenced by American statistics, as well as regular comments from high-ranking officials on measures to counter COVID-19.
Taking into account that the current growth of the euro/dollar is still of a corrective nature, the main trading idea, in the author’s personal opinion, is sales after reaching strong and significant price zones.
I suggest considering opening short positions after the rate rises in the price zones of 1.0980-1.1010 and (or) in the area of 1.1030. Earlier and aggressive sales can be tried from the area of 1.0950-1.0995.