Improving Market Sentiment Thanks to China
While other non-safe haven currencies traded higher as coronavirus fears eased, EURUSD traded lower. The currency pair was the biggest loser in yesterday’s trading, closing 0.14% lower from its opening price at 1.1044.
The coronavirus has yet to show signs of slowing down. As of this writing, the number of confirmed cases is already up at 24, 551 and the death toll is up at 493. There have also not yet been any news of a cure. However, China’s commitment to support its economy amid the outbreak brought about by its containment efforts were enough to ease investors yesterday. Remember that on Monday, the PBOC injected 170 billion USD into the economy and cut rates by 10 basis points.
Rising Unemployment in Spain
Unlike the other major currencies, however, it would seem that the euro was weighed down by negative data yesterday. The fourth-largest economy in the bloc, Spain, reported more than double the expected unemployment count for January. It unemployment change report printed at 90,200 versus the 44,200 forecast.
Events Due for EURUSD Today
For today, a few events are scheduled from the euro zone. At 8:50 am, the French final services PMI is eyed at 51.7 while the German version of the report is seen at 54.2. Then at 9:00 am GMT, the euro zone final services PMI is estimated at 52.2.
At 10:00 am GMT, the region’s retail sales report for December is anticipated to show at 0.5% contraction.
Then at 12:15 pm GMT, the biggest event risk for the euro is going to be ECB President Christine Lagarde’s speech. Remarks about the direction of monetary policy or her assessment of the economy could spark volatility on the currency.
At 1:15 pm GMT, the ADP will release its non-farm employment change report for January. The report is meant to predict the government’s official data which is due on Friday. A figure higher than the anticipated 157,000 job growth could strengthen the dollar as it would suggest that the NFP report would post solid numbers.
Finally, at 3:00 pm GMT, the ISM non-manufacturing PMI is estimated to come in at 55.1.
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EURUSD Outlook
On the 1-hour time frame, we see that EURUSD made higher highs in last week’s trading. However, this week, the currency pair has been trading lower. Looking closely at the chart, we can see what looks like a skewed head and shoulders pattern. This chart pattern is considered as a bearish indicator as EURUSD recent lower highs indicate that the momentum has shifted to the seller. The currency pair now seems that it is trading below neckline support. In forex trading, this is often seen as the confirmation that there are enough sellers in the market to push EURUSD lower. However, I would wait for a strong bearish close below yesterday’s low at 1.1031 before selling.
As of this writing, EURUSD is testing support at the 200 SMA around 1.1033. If there are enough buyers in the market, support could hold. A bullish close above the falling trend line (from connecting the highs of February 3 and February 4) may even invalidate the bearish chart pattern. If this happens, we could soon see EURUSD trade higher to its January 31 highs at 1.1090.
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