EURUSD: upwards correction expected

6 February, 2020

On Wednesday, February 5, the euro was down at the end of trading. In the American session, the pair fell to 1.0994. The US dollar strengthened against the yen, Swiss franc and the euro off the back of the news that China has found two effective drugs to treat the novel coronavirus. UK-based Sky News also announced a “significant breakthrough” in vaccine development.

At the same time, the World Health Organization stated that “there are no known effective methods of treatment against the virus” and that it doesn’t know anything about any “breakthroughs” in treatment.

The news triggered a rally in stock indices and increased demand for risky assets other than the euro. American statistics also put pressure on the euro, as the number of new jobs in the private sector and the index of business activity in the service sector in the US exceeded market expectations.

Today’s events (GMT+3):

  • 11:00 Eurozone: ECB's President Lagarde speech.
  • 12:00 Eurozone: Economic Bulletin.
  • 13:00 Eurozone European Commission releases Economic Growth Forecasts.
  • 16:30 USA: Initial Jobless Claims (Jan 31).
  • 17:15 USA: Fed's Kaplan speech.

The target area of ​​1.1016 has been reached. Bears flew by the 67th degree and stopped at the 90th degree. It is not a reversal, but before tomorrow's NFP report, the euro can recover to the balance line of 1.1020. The 45th degree is located at the 1.1047 mark. For growth, the single currency will rely on the release of strong news concerning the EU economy.

Yesterday, ECB President Christine Lagarde spoke. Short-term uncertainty is mainly associated with global risks - trade, geopolitics, and now the coronavirus. She speaks again today, at 11:00 Moscow time.

We believe that the level of 1.0985 is a strong support. We dare to consider the forecasted growth to 1.1020 through the setting of a new low. The sharper the rebound and the greater the pullback, the higher the probability of the price returning to the 1.1090 level.

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