EURUSD: Bearish Flag Spotted Around 2019 Lows Ahead of Lagarde’s Speech
The sell-off on EURUSD continued yesterday despite the lack of market-moving reports. The currency pair opened at 1.0941 and fell to its 4-month lows at 1.0907 before closing the day at 1.0910.
Only third-tier data were released from the euro zone yesterday but they were enough to push EURUSD lower as they added to the already-long list of negative reports. Italian industrial production contracted in December by 2.7% after coming in flat the month prior. This marked the lowest reading we have seen since May 11, 2009! Meanwhile, Sentix reported a deterioration in investor confidence for February. The reading came in at 5.2 versus the 6.1 forecast and down from January’s reading at 7.6.
Market participants are concerned because the recent slew of negative data do not even reflect the impact of the coronavirus outbreak. Speculations are that the euro zone economy could be headed lower when the impact of the infection is finally accounted for.
Later today, at 2:00 pm GMT, ECB President Christine Lagarde is scheduled to make a speech. Her remarks about the economy, the future of monetary policy, and how she thinks the coronavirus could impact growth may cause volatility on EURUSD.
On the daily time frame, we can see that EURUSD has fallen to the 1.0900 handle. This price coincides with the level where it bottomed out in 2019. Are there willing buyers on EURUSD at this price?
On the hourly time frame, we can see that the currency pair has consolidated after a drastic drop from yesterday’s trading. This has, in turn, allowed for a bearish flag pattern to form. In forex trading, this is considered as a bearish continuation pattern. A close below yesterday’s intraday lows at 1.0907 could mean that EURUSD may soon drop to 1.0878 which is its exact low for 2019. If support at that price does not hold, the next floor could be at 1.0563 where EURUSD hit a low in April 9, 2017.
On the other hand, a bullish close above today’s Asian session highs at 1.0916 could mean that EURUSD has some room to trade higher. Near-term resistance is at 1.0927 which coincides with the falling trend line from connecting the highs of February 5, February 6, February 7, and February 10.