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Aayush Jindal

Key Highlights

  • EUR/USD extended its decline to a new monthly low at 1.0727.
  • A major bearish trend line is forming with resistance near 1.0860 on the 4-hours chart.
  • The German IFO Business Sentiment Index declined from 85.9 to 74.3 in April 2020.
  • The US Durable Goods Orders dropped 14.4% in March 2020.

EUR/USD Technical Analysis

This past week, the Euro failed to recover above the 1.0900 resistance against the US Dollar. As a result, EUR/USD extended its decline below the 1.0850 and 1.0800 support levels.

Looking at the 4-hours chart, the pair even broke the 1.0750 level and traded to a new monthly low at 1.0727. Recently, it started an upside correction and traded above the 1.0780 level.

Besides, there was a break above the 23.6% Fib retracement level of the recent drop from the 1.0990 high to 1.0727 low. However, there is a strong resistance forming near the 1.0860 level and 100 simple moving average (red, 4-hours).

There is also a major bearish trend line forming with resistance near 1.0860 on the same chart. It coincides with the 50% Fib retracement level of the recent drop from the 1.0990 high to 1.0727 low. The next key resistance is near 1.0900 and the 200 simple moving average (green, 4-hours).

Therefore, a successful break above the 1.0880 and 1.0900 resistance levels is needed to start a decent recovery wave. The next major resistance could be the 1.1000 pivot level.

Conversely, EUR/USD might fail to recover above 1.0860 and 1.0880. In the mentioned case, there are chances of a fresh decline below the 1.0780 and 1.0750 levels in the near term.

Fundamentally, the German IFO business sentiment index for April 2020 was released by the CESifo Group. The market was looking for a decline in the index from 86.1 to 80.0.

However, the result was below the market forecast, as the German IFO business sentiment index declined to 74.3. Besides, the last reading was revised down from 86.1 to 85.9.

The report added:

This is the lowest value ever recorded, and never before has the index fallen so drastically. This is primarily due to the massive deterioration in the current situation. Companies have never been so pessimistic about the coming months. The coronavirus crisis is striking the German economy with full fury.

Overall, EUR/USD could struggle to clear the 1.0880 resistance, above which it could gain traction. Similarly, GBP/USD must break 1.2400-1.2420 to start a decent recovery wave.

Upcoming Economic Releases

  • Dallas Fed Manufacturing Business Index for April 2020 – Forecast -75.0, versus -70.0 previous.