After steady gains against the US Dollar during most of June, sudden fear in the forex market sparked by renewed worries about Coronavirus has caused a selloff of the Euro against the US Dollar. The last week of trading has seen a couple of tests towards important resistance of 1.1350 for the Single Currency, but late last night the Euro reversed downward and lost value against the US Dollar. This occurred as US media has made it crystal clear the United States is facing another spike in Coronavirus infections and unleashed more worries about the long term economic health of the US, which would have an obvious knock-on effect with global commerce.
Traders must be careful about using technical charts when hysteria hits the broad markets. The bursts of negative news late in the day also caused US equity markets to trigger steep losses. The word trigger is used carefully because of the steep decline in US indices and in a related manner, the Euro against the US Dollar has been anticipated by some traders who were likely waiting for another wave of negative news to hit the broad marketplace.
The short term may prove volatile for the EUR/USD if negative news persists the next two days. Traders have learned to cope with the rush of bad news surges which can sometimes spark volatile sentiment in financial markets. The final results and impact from the Coronavirus is certainly not known. If news persists about statistics in the US growing worse, the EUR/USD could find more sellers emerge as investors try to lock themselves into the safe haven of the US Dollar.
Support appears to be around 1.1220 for the EUR/USD in early trading this morning. However, a simple look at a one day chart shows this level could prove vulnerable quickly. A support level of 1.1160 was touched only a couple of days ago in recent fast test of price action.
Speculative traders who believe the EUR/USD will suddenly gain value cannot be discounted either. The US Dollar from a long term perspective still has negative sentiment shadowing because of Federal Reserve policy which is facing tough questions. Technically traders who seek to buy the EUR/USD at its current levels will look to the Single Currency’s recent test of higher resistance and target a turnaround if they believe the sudden bust of negative news will calm and higher values will emerge within its known range.
EUR/USD Short Term Outlook:
Current Resistance: 1.12800
Current Support: 1.1220
High Target: 1.4000
Low Target: 1.1160
