EURUSD fell to 1.0864 this Asian session–its lowest level since May 2017–on coronavirus fears. This is after the currency pair incurred a 42-pip loss in yesterday’s trading.
The biggest headline in today’s trading is the surge in the number of coronavirus cases reported in China. Government officials reported 14,840 new cases earlier this morning. This marked the largest increase for a single day since the outbreak started! The death toll has also risen to 242.
Although the dramatic rise in outbreak cases can be attributed to how the government changed the way it qualifies if a person is indeed infected, it was enough to spark risk aversion.
It also did not help EURUSD that data from the euro zone failed to impress. December’s industrial production contracted by 2.1%. This decline was not only worse than the -1.8% forecast, the reading for November was also revised lower from 0.2% to 0.0%.
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On the hourly time frame, we can see that EURUSD has been consolidating during the last few hours of trading. Because this follows after a sharp drop from yesterday, a bearish flag has materialized. In forex trading, this chart pattern is considered as a bearish continuation pattern. A close below today’s low at 1.0864 could trigger a bigger sell-off on EURUSD. The currency pair could fall to test support at the 1.0800 handle.
On the other hand, if there are enough buyers at EURUSD’s multi-year lows, we could see it trade higher. Near-term resistance is at 1.0900 where the falling trend line and previous lows seem to coincide.