- Summary:
- EURUSD was dragged down lower yesterday by a combination of negative data and risk aversion. Can it stay above 1.1000 today?
German Businesses Less Optimistic in 2020
Aside from risk aversion sparked by coronavirus concerns, EURUSD was heavily weighed down in yesterday’s trading by negative data. The currency pair finished yesterday’s trading 13 pips lower at 1.1017 as the German Ifo Business Climate report for January missed forecasts. According to Ifo, German businesses grew less optimistic about economic conditions this January. The expectation was for the report to print at 97.1 to follow December’s 96.3 reading. However, the actual data came in at 95.9. Consequently, demand for EURUSD was dampened because the report raises concerns about the German economy.
Wuhan Coronavirus Continues to Spread
It also did not help that the Wuhan coronavirus continues to spread. As of this writing, the number of confirmed cases is already near 5,000 and the death toll has also risen to 107. There are no major reports scheduled from the euro zone today which means that EURUSD will likely take its cue from market sentiment. Worsening conditions about the coronavirus could trigger risk aversion and drag the euro lower. On the other hand, a breakthrough in finding a cure for the infection could trigger risk appetite and push EURUSD higher.
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EURUSD Outlook
On the hourly time frame, we can see that EURUSD has broken resistance at a minor falling trend line (from connecting the highs of January 23, January 24, and January 27). This could indicate that there are enough buyers in the market today to push EURUSD higher. Near-term resistance is around 1.1050 where the 100 SMA seems to be. This price also looks to coincide with the 38.2% Fib level (when you draw the Fibonacci retracement tool from the high of January 23 to the low of January 27). Lastly, there’s another trend line that aligns at this price from connecting the highs of January 16 and January 23.
On the other hand, a close below yesterday’s low at 1.1008 could mean that EURUSD would soon fall to its November 2019 lows at 1.0991.