EURUSD Lower On Coronavirus Fears; Can the German IFO Report Provide Support?
Like most non-safe haven currencies like the Aussie and Kiwi, EURUSD is trading lower at the start of this week thanks to risk aversion. The currency pair opened with a 27-pip weekend gap at 1.0820.
The cause of the weekend gap across most major currency pairs was the G20 Meetings that happened in Riyadh, Saudi Arabia. Leaders expressed their concerns about the coronavirus outbreak on the global economy. Previously, policymakers seemed to have shrugged off its effects. However, over the weekend, it seemed that some were preparing for an economic slowdown. The IMF warned that Chinese growth could fall below 6% while South Korea announced that its recovery is at risk. Consequently, risk aversion boosted demand for safe haven assets like the US dollar and dampened demand for other currencies.
Can today’s German IFO provide EURUSD with support? Due at 9:00 am GMT, the German IFO Business Climate report for February is expected to print at 95.0. A reading higher than the forecast could be bullish for the currency pair because it would suggest robust economic growth in Germany. Conversely, a disappointing figure could be bearish for EURUSD because it may hint at slower growth or maybe even a contraction in the euro zone’s largest economy.
On the hourly time frame, we can see that EURUSD has pared most of its gains to around the 50% Fib level (drawing from the low of February 20 to its intraday high). However, the currency pair still has some room to trade lower to around 1.0810 where the 61.8% Fib level coincides with the previous highs. Reversal candles around this level could indicate that there are still buyers in the market who could push EURUSD to its recent highs at 1.0860. On the other hand, a close below the 61.8% Fib level may suggest that sellers have taken over. The next near-term support level for EURUSD would be last week’s lows at 1.0780.