FOREX TRADING IDEA EUR/USD
Strategy
Look to sell on a rally to 1.0930 for a movement lower to 1.0635. Stop should be placed above 1.1150.
Technical View
Price recently recovered from a low of 1.0727 but the decline seems a bit short compared to the first decline starting from 1.1146. Even if this is a corrective move, the supposed C leg is also too short when compared to the A leg. We think the corrective decline may not be over as yet. We think there may be another decline that could bring price lower to 1.0635.
MACD is still bearish despite the 2 days of rally. MACD is still below the zero line. MACD is also flat, indicating there is no trend. This may mean a correction in progress as well. Stochastic may have a bullish crossover but Stochastic does not look strong. Price is also below the 50EMA and there is a price resistance at 1.0915.
Fundamental View
The Euro zone economy, before the COVID-19 strike, was comparatively weaker than the US economy. The US economy GDP was growing at close to 3% while the Euro zone economy was growing below 1%. Both economies suffered as a result of the coronavirus and its impact on the global economy. But with the US economy on a better footing then the Eurozone economy before the health crisis, we believe the US economy would come out stronger and recover better than the Eurozone economy.
When China shut down its economy before COVID-19 hit the Eurozone and US economy, it affected the Eurozone economy more than the US economy. US was a buyer of China’s production while Eurozone was more of a supply chain with China feeding the US economy. This is likely to affect the Euro zone economy more.
The US dollar has a higher interest rate and this is likely to keep it stronger than the Euro dollar which has a negative overnight interest rate. The US dollar is also a safe haven currency. In this situation of coronavirus, the US dollar is likely to be preferred over the Euro dollar.