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#1 18-03-2020 13:17:01

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: 200+ pip plunge - is a rebound or a further decline coming?

EUR/USD: the euro hesitating around 1.10 after a 200+ pip plunge, is a rebound or a further decline coming?


The pair plunged sharply on Tuesday, testing the major psychological threshold of 1.10 in the afternoon with a low of 1.0954, the lowest price observed since the end of February, after starting the day at around 1.1180.

The pullback was originally linked to technical analysis factors with the obstacle of the 100-hour moving average and the psychological threshold of 1.12 which had frightened buyers and allowed sellers to regain control.

The fall then worsened in the face of the publication of the German ZEW index of economic sentiment for this month, one of the first European statistics to report on the impact of the new virus.

The index plunged to -50 points for March, the lowest in over 8 years, after dropping 8.8 points in February. This is the biggest month-on-month drop in the indicator, which suggests that it could have a huge impact on other statistics as well.

As for the chart's context, several key elements can be noted.

The pair has indeed broken below its 100 and 200 day moving averages, indicators that had protected the pair from too sharp a drop in the previous days.

The 1.10 threshold test was also a key signal, which was not confirmed as the pair is currently hesitating around this major psychological threshold.

A rebound from this area is therefore not ruled out, although consolidation is more likely.

If buyers take the lead, the psychological threshold of 1.11 will be the first potential target to watch, ahead of 1.12, while if the correction continues, Tuesday's low around 1.0949 will be the first potential support, before the psychological threshold of 1.09, a threshold that the UOB bank considers untouchable in its technical analysis of the day:

"We weren't expecting the EUR's sharp and sudden drop to a low of 1.0953 on Tuesday. Although oversold, the decline still shows no sign of stabilising. From there, the European currency may drop below yesterday's lows, but the next support level at 1.0900 is probably out of reach. Resistance is at 1.1049 but only a return above 1.1100 would indicate that the current weakness has stabilised".

Currently, the EUR/USD pair is trading at 1.0967 on the forex.

Hourly EUR/USD chart

http://www.forex-central.net/forum/userimages/EURUSD-H1.png



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