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EURUSD crosses key resistance in what seems like a dead cat bounce


The EURUSD pair moved above the important resistance of 1.1325 as optimism on the euro started to come back. The price is up by about 25 basis points today as bulls attempt to resume the previous upward trend.

Eurozone industrial production data

The EURUSD pair is reacting to better-than-expected industrial production data from the eurozone. According to Eurostat, the production declined by a record 17.1% in April as the country remained in a shutdown. This was a sharper decline than the previous decline of 11.9% and was the worst number on record. Still, it was better than the expected decline of 20%.

The industrial production declined by 28% on an annualised basis after dropping by 13.5% in March. Analysts were expecting the decline to be about 29.5%. These numbers show just how battered the eurozone’s economy is because of the virus.

Perhaps, the EURUSD pair is ecstatic about the new stimulus package that is being rolled out in Germany. The Angela Merkel government is expected to rollout a $145 billion stimulus package that will help the economy recover. Some of the funds will go towards children while others will go towards businesses. A significant part of the stimulus will be in form of VAT reduction.

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EURUSD technical outlook

The EURUSD pair has been unease this week mostly because of the strength of the US dollar. The pair is now trading at 1.1325 as bulls attempt to continue with the previous trend. The price is still above the 100-day and 50-day exponential moving averages on the four-hour chart. Still, this upward trend seems to be a dead cat bounce, especially because of the current concerns about a second wave of coronavirus. As such, there is a possibility that the pair will resume the downward trend as bears attempt to move below the 23.6% Fibonacci retracement level.

On the flip side, a move above the important resistance of 1.1385 will invalidate this trend.

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