EURUSD: pair trying to recover after a prolonged dip

On Monday, February 24, trading on the euro was up by 0.05% at the close. During US trading, bulls clawed back their morning losses suffered as a result of the news out of Italy regarding the coronavirus. A new wave of concern among investors was caused by a sharp increase in the number of new coronavirus cases recorded in northern Italy.

Today, the number of cases in Italy stands at 229 people. (an increase of 72 compared to Monday), seven people died. According to the latest data, the total number of cases exceeded 80,000. So far, 2,699 people have died from the virus, while more than 27,000 have been cured.

The spread of the coronavirus epidemic outside of China contributed to the closure of risk positions, as a result of which the yen and gold received support. The gold exchange rate has grown rapidly and reached set a new high of $1,689 USD per troy ounce (highest since 2013). The price of oil was down 4.5% to $55.71 USD. The VIX Fear Index set a fresh six-month high (26.35).

At the American session, the euro received support, which resulted from the weakness of the US dollar amid expectations of a softening of the US Federal Reserve monetary policy. According to the forecast, the probability of a rate cut in July is 79.9%. The pair subsequently recovered to 1.0872.

Today’s events (GMT+3):

  • 10:00 Germany: Gross Domestic Product (QoQ) (Q4).
  • 14:00 UK: CBI Distributive Trades Survey - Realized (MoM) (Feb).
  • 17:00 USA: S&P/Case-Shiller Home Price Indices (YoY) (Dec).
  • 17:45 USA: Fed's Kaplan speech.
  • 18:00 USA: Consumer Confidence, Richmond Fed Manufacturing Index (Feb).
  • 23:00 USA: Fed's Clarida speech.
Рис. 1

Current situation:

At the time of writing, the euro is worth 1.0849. An upwards channel has formed on the hourly TF. The price is fluctuating around the 45th degree. The euro is trying to gain ground, based on growing hopes regarding potential stimulation of the economy by the US Federal Reserve System (FRS), but remains vulnerable to the coronavirus.

From a technical point of view, the EURUSD recovery looks like a normal correction. Growth is unstable, as is the price model itself, and therefore, according to the forecast, we must consider a fall down to 1.0816. The balance line (SMA55) will provide intermediate support at around the 1.0835-mark. If by some miracle the level of 1.0835 remains and the price returns to 1.0882, then after the bounce-back it is worth considering a savage correction up to 1.0947.

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