EUR bearish, USD bullish as week one of Q2 draws to a close

The EUR/USD already lost more than half of its initial gains – 1.0641 to 1.1151- over the last week. Even as the U.S. tries to curtail the effects of the COVID-19 pandemic on their economy, the euro continues to fall.

The euro appears to be in greater crisis. China has sold euro-denominated bonds for the first time in 25 years. We expect that with this and several other factors, the bearish trend might continue on the EUR/USD market in the coming week.

Technicals

Daily Chart – EUR/USD 05/04/2020

Daily Chart – EUR/USD 05/04/2020
P: 1.081
S3: 1.0653S2: 1.0732S1: 1.0769 
R1: 1.0847R2: 1.0889R3: 1.0967

The EUR/USD was pushing through an uptrend last week. However, it has undergone a crucial reversal this week. And things have been going downhill since then.

On the 28th of March, the market began its downward move. The market reversed from the 1.1150 levels to the current trading area: 1.0823-1.1242. Following this reversal, there is still some evidence that the market could keep up with its bearish move and push further down.

At the close of the week, the market currently sits below the 50MA, the 100MA, as well as the 200MA. Also, the RSI is sitting outside the oversold position.

All these indicate that the downward momentum can still pick up more pace, and we might be heading for a catastrophic drop.

The close below the low is encouraging for the bears to push the EUR/USD towards the 1.0499 zones. A close below that level may push the price even lower towards the 0.9989 resistance. In that case, the weekly support levels on the chart should be taken into consideration.

On the flip side, if the market doesn’t close below the low end, there is some level of bearish hesitation. This hesitation could be the sign of a reversal. We could be heading towards the high end of the market zone. Should the market close even higher – above the 1.1301 level, the rally could stretch towards the 1.1640 level.

We advise that you pay attention to market movements towards the daily and weekly resistance zones.

Fundamentals

The number of COVID-19 deaths in Italy continues to increase. Over half of COVID-19 deaths from around the world are now either from Spain, Italy, or France. So it should come as no surprise that the economies of the European states are struggling to stay above water.

Here are some of the reasons why these drops are happening:

  1. More panic as figures continue to rise

Italy of late appears to have the pandemic somewhat under control, with the numbers of new infections and mortality rates dropping on a daily basis. Spain and France, on the other hand, have had more issues getting the pandemic under control, with mortality rates rising daily.

  1. No bonds to relieve the crisis

Leaders of the grand continent remain at a standstill in helping to provide some levels of relief to the massively affected economies. Jobless claims in the region continue to rise, and further weakness will be confirmed after the PMI is released.

Our Conclusion

The bearish trend on the EUR/USD might continue over the next week. Over 60% of traders and analysts favor the bears over the bulls. All evidence points towards a bearish new week for the EUR/USD.

However, as the pandemic continues to unfurl, we must not throw caution to the wind as anything can happen over the coming week.