EUR/USD Rate Tracks Monthly Range While ECB Rules Out V-Shape Recovery

EUR/USD Rate Talking Points

EUR/USDretraces a decrease from a prior week even yet a European Central Bank (ECB) shows a larger eagerness to support a Euro Area, and sell rate might trade within a some-more tangible operation over a residue of a month as a new miscarry fails to trigger a exam of a May high (1.1020).

EUR/USD Tracks Monthly Range While ECB Rules Out V-Shape Recovery

EUR/USD snaps a array of reduce highs and lows from a prior week notwithstanding a antithesis (Austria, Denmark, Sweden and a Netherlands) to a EUR500 billion liberation comment drawn adult by France and Germany, and a sell rate might connect over a entrance days as a European Union (EU) prepares to betray a seven-year bill on May 27.

It stays to be seen if European officials will make a vital proclamation as a ECB argues that “fiscal process also indispensable to play an essential role,” and a Governing Council might keep a active proceed in combating a mercantile startle from COVID-19 as “growth scenarios constructed by ECB staff suggested that euro area GDP could tumble by between 5% and 12% this year.”

The comment of a ECB’s Apr assembly warns that “the longer a lockdown measures were in place, a some-more critical a impact on activity and prices would be,” with President Christine Lagarde and Co. emphasizing that “the mercantile effects of a pestilence would continue for a substantial duration after a coronavirus was contained, as a decrease in direct overdue to precautionary motives or to income waste could be approaching to import on mercantile activity, heading to a delayed recovery.

In turn, a ECB states that “a quick V-shaped liberation could substantially already be ruled out during this stage,” and a executive bank might take additional stairs to support a financial kinship as “strong and timely efforts were urgently indispensable to ready and support a recovery.”

The comments advise a ECB will continue to implement a change piece as the Governing Council pledges to “adjust a PEPP (Pandemic Emergency Purchase Programme) and potentially other instruments if it saw that a scale of a impulse was descending brief of what was needed,” and President Lagarde and Co. might announce additional measures during a subsequent assembly on Jun 4 as a executive bank stands “ready to adjust all of a measures, as appropriate, to safeguard that acceleration changed towards a aim in a postulated manner.

With that said, a ECB’s dovish brazen superintendence for financial process might benefaction headwinds for a Euro via 2020, though EUR/USD might trade within a some-more tangible operation over a residue of a month as a new miscarry in a sell rate fails to trigger a exam of a May high (1.1020).

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EUR/USD Rate Daily Chart

Image of EUR/USD rate daily chart

Source: Trading View

  • Keep in mind, a monthly opening operation has been a pivotal energetic for EUR/USD in a fourth entertain of 2019 as a sell rate forged a vital low on Oct 1, with a high for Nov occurring during a initial full week of a month, while a low for Dec happened on a initial day of a month.
  • The opening operation for 2020 showed a identical unfolding as EUR/USD noted a high of a month on Jan 2, with a sell rate figure a Feb high during a initial trade day of a month.
  • However, a opening operation for Mar was reduction applicable amid a pickup in volatility, with a pullback from a yearly high (1.1495) producing a mangle of a Feb low (1.0778) as a sell rate slipped to a uninformed 2020 low (1.0636).
  • Nevertheless, EUR/USD might trade within a some-more tangible operation as a allege from a Apr low (1.0727) unsuccessful to furnish a exam of a Apr high (1.1039), with a identical unfolding holding figure this month as a allege during a prior week unsuccessful to trigger a exam of a May high (1.1020).
  • In turn, a Fibonacci overlie around 1.0950 (100% expansion) to 1.0980 (78.6% retracement) is behind on a radar for EUR/USD as a sell rate snaps a new array of reduce highs and lows following a unsuccessful try to break/close next a 1.0830 (78.6% expansion) to 1.0860 (23.6% retracement) region.

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— Written by David Song, Currency Strategist

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