Increased fears of a coronavirus pandemic plummeted global stocks at the start of today's European session. The DXY dollar index fell below 96.00, and the yield on 10-year US bonds fell by almost 18%, to 0.723%, to historical lows.
The growth of almost panic investor sentiment was facilitated by information on the penetration of coronavirus into the United States. EUR / USD updated the highs of July 2019, breaking through the psychologically significant resistance level of 1.1300, and reached the first critical resistance level of 1.1340 at the beginning of today's European session (EMA144 on the weekly chart). If the growth of EUR/USD does not stop, then the pair can reach the key resistance level of 1.1440 (EMA200 on the weekly chart), the breakdown of which can signal the breaking of the long-term bearish trend of EUR / USD.
Last Tuesday, the Fed unexpectedly lowered the interest rate by 0.50%, substantiating its decision with the need for preventive measures to maintain the American economy, which, according to Fed leaders, remains strong. The next Fed meeting will be held on March 18, and it is possible that the rate will be reduced again. By the way, US President Donald Trump after the Fed lowered the rate on Tuesday again called on the Fed to lower the interest rate even lower, down to 0%. “They (the Fed) are acting belatedly”, Trump said, but should, in his opinion, act ahead of events.
Today, volatility in the financial markets may rise again at 13:30 (GMT), when data from the US labor market will be published. Strong data expected.
Nevertheless, even if the data are confirmed or turn out to be better than expected (NFP is expected to grow by 175,000 new jobs), one should not expect a significant strengthening of the dollar and a fall in EUR / USD.
The fall of European stock indices leaves the euro, which is the funding currency, no chance of weakening.
In the current situation of growth of already almost panic moods, it makes no sense to expect a quick recovery of world stock indices. Technical analysis fades into the background.
And, nevertheless, you can’t completely forget about the alternative scenario. The first signal to start the correctional decline will be the breakdown of support levels 1.1285 (Fibonacci level 23.6% of upward correction to the fall of the pair from 1.3870 in May 2014 to 1.0480 reached in March 2015), 1.1240 (ЕМА200 on the 5-minute price chart and highs of December 2019).
However, only the return of EUR / USD to the zone below the key support level of 1.1100 (EMA200 on the daily chart) will reassure investors and create the prerequisites for the pair to sell.
Support Levels: 1.1300, 1.1285, 1.1240, 1.1205, 1.1100
Resistance Levels: 1.1340, 1.1400, 1.1440
Trading Recommendations
Sell Stop 1.1275. Stop-Loss 1.1330. Take-Profit 1.1240, 1.1205, 1.1100
Buy Stop 1.1330. Stop-Loss 1.1275. Take-Profit 1.1340, 1.1400, 1.1440