Forex Focus
EURUSD has lost around 180 pips in a span of 9 trading days. Most of the sell-off has been driven by fears surrounding the coronavirus. However, despite no signs of the infection’s spread stopping anytime soon, a close look at the technical set up of the currency pair suggests that the sell-off could be over.
On the daily time frame, we can see that EURUSD has found its way back to its previous lows around 1.1000. A couple of hammer candlesticks have also materialized including yesterday’s candle. This was brought about by the FOMC rate statement being more dovish than expected. Fed Reserve Chairman Jerome Powell did not announce any changes to interest rates. However, he did remark that the Fed may soon need to increase its repo market operations. Consequently, EURUSD recouped some of its losses from 1.0991 to 1.1020.
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The hourly time frame supports this assumption too. The currency pair looks to have formed higher lows recently after a series of lower lows. Consequently, an inverse head and shoulders pattern has materialized at the support level. A bullish close above yesterday’s New York session highs may warrant a neck line break and trigger an upside rally. Near-term resistance is around 1.1052 where the 200 SMA is.
However, take note that EURUSD is still testing resistance at the 100 SMA and falling trend line (from connecting the highs of January 16 and January 23). A close below today’s Asian low could indicate that there are still sellers present and that EURUSD could fall yesterday’s lows at 1.0991.