Reversal signal is fading after Monday’s gap-lower opening and failure to capitalize on strong German data
The Euro opened with gap-lower at the beginning of the week and dipped to session low at 1.0805 that partially offset reversal signals from last Friday’s massive bullish candle (the pair was up 0.6% for the day).
Better than expected German Ifo data (Feb 96.1 vs 95.3 f/c) pushed the pair to Asian session high at 1.0842 but gains were short-lived and repeated attempt to fill overnight’s gap stalled, keeping the downside at risk.
Prevailing tone on daily chart is negative as the price action returned below falling 10DMA after brief close above it on Friday and negative momentum started to rise again on Monday.
Repeated weekly close below Fibo level at 1.0863 (76.4% of 1.0340/1.2555 ascend) and filled gap from April 2017 were strong bearish signals, which adds to negative outlook.
Global risk aversion on rising fears of coronavirus pandemic after the virus started to spread outside China, prompted traders out of riskier assets that strongly inflated US dollar and increased pressure on Euro.
Risk of retesting last Thursday’s new low at 1.0778 remains in play, with break here to open way towards target at 1.0570 (10 Apr 2017 trough).
Only return and repeated close above 10 DMA (1.0834) would ease immediate downside risk and signal extended consolidation, while extension above descending 20DMA (1.0921) would signal reversal.
Res: 1.0834; 1.0863; 1.0899; 1.0921
Sup: 1.0805; 1.0778; 1.0752; 1.0700