Upward Channel Intact
The EUR/USD closed at 1.2033 after placing a high of 1.2045 and a low of 1.1998. The EUR/USD pair extended its losses on Wednesday and reached below the 1.200 level despite the U.S. dollar weakness. Higher equity prices and lower U.S. Treasury yields kept the greenback under pressure on Wednesday while keeping the U.S. Dollar Index near 91.0 level. The U.S. Treasury yield on benchmark 10-year note remained below 1.6% at 1.573% and kept on weighing over the U.S. dollar.
Despite the weakness in the U.S. dollar, the EUR/USD pair continued its bearish momentum on the back of risk-off market sentiment driven by the rising concerns over the global economic recovery amid increased coronavirus infections. On Tuesday, World Health Organization released a report suggesting an increased number of coronavirus infections worldwide during last week. The agency said that the number of cases increased more than ever in seven-day period since the pandemic started last week.
The WHO also reported that the number of deaths from pandemic was also rising at an alarming rate. The report suggested that about 5.24m cases were recorded last week, which is the highest record for seven-day compared to the previous 5.04m for the week ended on January 4.
The rising number of infections worldwide raised fears for economic recovery that ultimately supported the risk-off market environment and dragged the riskier assets like EUR/USD lower. The risk appetite across the global market was dampened on Wednesday due to the rising coronavirus cases and a fall in oil prices. They cast doubts on the strength of the global economic recovery. Furthermore, Eurozone bond yields held below the recent highs on Wednesday, a day ahead of the ECB meeting and after Germany’s constitutional court dismissed challenges to its approval of the E.U. recovery fund.
As the European Central Bank is set to announce its policy decision on Thursday, the investors became cautious about placing any strong position ahead. This type of cautious behavior of investors also kept the pair EUR/USD under consolidation on Wednesday. The ECB is primarily expected to keep policy on hold, while investors were looking for clarity on how it will react to economic recovery in Europe. Essentially in its emergency bond-buying program. On Wednesday, Germany’s constitutional court declined to block the E.U.’s COVID-19 recovery fund.
EURUSD Intraday Technical Levels
Pivot point; 1.2045
EUR/USD - Technical Outlook
On Thursday, the technical side of the EUR/USD hasn’t changed a lot as it continues to exhibit choppy sessions at the 1.2020 level. The pair is facing immediate resistance at 1.2043 and 1.2112 levels. On the 4-hour timeframe, the EUR/USD pair has formed an upward trendline that is supporting a bullish trend in the pair. However, the formation of Doji and Spinning top candles below the 1.2043 level hurt the market’s bullish sentiment. On the downside, the EUR/USD’s support stays at the 1.1983 level, and break out of this level extends price action towards the 1.1928 level. Considering the RSI and MACD, the overall trading bias remains bullish as their values are holding at 59 and 0.0021, respectively. Trader’s primary focus will remain on the ECB monitory policy decision as this even has the potential to drive sharp volatility in the market. All the best!
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