The EURUSD pair dropped by a few basis points as the market reacted to a series of weak economic data from the United States, Europe, and China.
Earlier today, data from China showed that the country recorded its first contraction in more than 25 years. The decline happened as the country locked-down most of its cities as it dealt with the coronavirus crisis. The Chinese slowdown data came hours after the disappointing jobless claims data from the United States.
Today, Eurostat released weak inflation data from Europe. The headline CPI rose to 0.7% in March after rising by 1.2% in February. This was the weakest annual inflation rate since 2016. The drop was driven by a fall in service prices, as most countries closed restaurants and airports. According to the data, most of the declines was from Italy, Spain, and Portugal.
The core CPI, which excludes the volatile food and energy products, rose by 1.1%, which was lower than the previous 1.2%. Additionally, data from Germany showed that car registrations declined by an annual rate of 37%. Worse, the data dropped by 62% and 44% in France and the UK.
Therefore, the dollar is gaining ground because of the current uncertainties since it is often viewed as a safe-haven currency.
On the four-hour chart, a few things are clear. First, the pair is in a bearish trend that was started on Wednesday, when it reached a high of 1.0990. This price was supported by the fact that it was along the downward trend shown in blue.
Second, as the pair moved from Wednesday’s high, the downward trend was confirmed by the bearish candlestick pattern known as three black crows.
Third, the downward trend was confirmed by the fact that it exited the Ichimoku cloud. This means that the pair may decline to test the previous double bottom at 1.0770.