EUR/USD briefly dipped below key monthly support at around 1.0892 as the dollar slipped and risk appetite increased after the FED announced its unlimited Quantitative Easing (QE) programme.
Price is currently testing key support at 1.0892, the previous monthly candle pierced below this level temporarily but did not have enough momentum to close below.
Although the previous candlestick has closed as a bullish hammer, prices are still underpinned by the 8-day moving average.
The upside movement has likely been triggered by a fall in the dollar index however, this is expected to fade as the economic impact that COVID-19 poses become clearer. A break above the 20-day EMA at 1.0965 could see prices push to the next monthly key resistance at 1.1211
The euro has been battered with key economies such as Italy experiencing significant outbreaks of COVID–19.
The ECB recently announced it was scraping its bond-buying emergency limits, triggering debt instruments such as short-dated Italian debt to rise and two-year yields dropping by 13 basis points.
This programme would allow the ECB to buy unlimited quantities of sovereign debt to help alleviate economic strains triggered by the COVID-19 outbreak. This could provide short term strength to EUR/USD and trigger a move up to the monthly resistance at 1.1211. However, the upside may be limited if dollar safe-haven buying momentum resumes.