• The ECB lowered the interest rate 
  • Huge move for the EUR/USD reaching the 1.0975 mark
  • US Unemployment claims increased comparing to the previous week

Technical Analysis

4-Hr Time Frame:

Last week the Euro was ranging between the trendline (in red) and the 1.0780 mark acting as monthly support. 

On Wednesday, the price managed to break the 100 SMA to the upside and even breakout the red trendline by closing above it. Yesterday, the EUR/USD rose by displaying a huge bullish engulfing candlestick leaving a bullish bias among the investors. 

The pair is traded above the 100-SMA, which gives the bulls the lead and we might see the Euro reaching soon the 1.1020 & 1.1100 zone. 

This scenario will be invalid if the bears take control and push the price lower than the monthly support 1.0780.

EUR/USD - The pair is traded above the 100-SMA, which gives the bulls the lead

Let’s have a quick look at what’s happening on the DXY index to understand how the EUR/USD will most likely move in the coming week. 

The chart below shows that the index reached a confluence zone which is at the 99 level. 

Two scenarios the US Dollar index might face. The first scenario is that the price might be rejected from this 99 level and move upward towards the 100 SMA. If it succeeds in that and closes above it, the 100.85 mark will be the next test. 

A second possible scenario is that the price will breakout of the support (99 level) and continue a downward movement.

DXY - US Dollar Index - The price could breakout of the support (99 level) and continue downward.

Fundamentals Analysis:

The president of European Central Bank, Christine Lagarde, declared that the ECB would lower the interest rate to support businesses by providing cheap loans to banks.

“Measures to contain the spread of the coronavirusCOVID-19, have largely halted economic activity in all the countries of the euro area and across the globe,”

Lagarde

Lagarde told an empty press room at the ECB’s headquarters in Frankfurt, Germany, after a meeting conducted by teleconference among members of its rate-setting council. – ABC News

Although the interest rate was lowered, the EUR/USD did not react as it should to this decision. Usually, when a central bank lowers the interest rate, the local currency depreciates. On Thursday, after the ECB interest decision, the Euro made a huge rally with more than 1.3% gain against the dollar.

The US data was negative since 3,839,000 Americans filed unemployment which was higher than expected.

The next few days will indicate whether the bulls will remain in control of the EUR/USD and push it higher.