EURUSD Forecast: Trump may end this recovery, counter-coronavirus stimulus is critical
EUR/USD is recovering amid falling US bond yields and Merkel's promises to act. Potential US fiscal stimulus has room to lift the dollar. Wednesday's four-hour chart is pointing to further gains.
Fiscal stimulus is the name of the game – or the lack of such action – in the wake of the coronavirus crisis. After stocks closed higher on Tuesday, President Donald Trump failed to show up for a press conference that had been touted as one in which he would announce new measures – and futures turned back down. Investors rotated back to bonds, pushing yields and the dollar lower.
EUR/USD took advantage of this move also thanks to hopeful signs from Europe. German Chancellor Angela Merkel said that she would do "whatever is necessary" and warned that 60-70% of Germans might get infected by the virus. Her speech came after the EU announced a €25 billion fund to mitigate the economic fallout – that failed to impress investors.
Perhaps Merkel was also responding to harsh warnings from Christine Lagarde, President of the European Central Bank. She reportedly told EU leaders that the continent is facing a 2008-style crisis if it fails to act.
Lagarde oversees the ECB's rate decision tomorrow, with limited scope to act. See ECB Preview: Three losing scenarios for Lagarde and EUR/USD as EU leaders fail to counter coronavirus
Merkel's promises helped the euro edge up, but many want to see a more significant response, such as the coordinated action between the Bank of England and the British government.
Unless European leaders present an imminent broad plan, the ball returns to Trump's court. The White House will reportedly hold an emergency meeting later on. If the administration announces new measures, the dollar and stocks may run higher. Otherwise, EUR/USD has more room to rise.
See Trump's Draghi moment: Markets desire “whatever it takes” message, time for governments to act
Overall, coronavirus-related developments are left, right, and center. The latest figures are of over 1,000 cases in the US, more than 10,000 in Italy, and a grand total of more than 121,000 worldwide.
EUR/USD Technical Analysis
Euro/dollar is trading above the 50, 100, and 200 Simple Moving Averages and enjoying upside momentum. The Relative Strength Index is around 50, far from overbought or oversold conditions.
Bulls are in the lead.
Resistance awaits at 1.1360, which is the daily high, followed by 1.1410 and 1.1495.
Support awaits at 1.1275, the daily low, and then by 1.1215, 1.1170, and 1.11.
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