Here’s Why EUR/USD Has Lost More Than 2% in January

EUR/USD is on its way to create the fifth consecutive bearish candle for the first since May 2018. The major opened the year with a long red candle and has continued in the same fashion amid increased demand for the USD. 

Fundamental analysis: All eyes on Fed

The most recent push lower has been attributed to growing fears related to coronavirus, that is quickly spreading from China to the rest of Asia. Media reports state that the current death toll is 132 as patients with this virus are also reported in Germany and the United Arab Emirates.

For this reason, investors are moving their funds from high-yielding assets, such as stocks, to more safe-haven assets e.g. gold, yen etc. 

On the data end, German Consumer Climate improved to 9.9 in February, although the EUR/USD has practically ignored the data with the focus still on China and coronavirus.

It will be harder to ignore the Fed meeting that takes place tonight, with the Fed Funds Target Range expected to be unchanged at 1.50%-1.75%. Thus, all eyes will be on the release of the meeting’s minutes and Chief Powell’s press conference afterwards. 

Its counterpart, the  European Central Bank (ECB), is expected to finish its strategic review soon. The member of the Governing Council, Olli Rehn, said that the bank has the tools to intervene if needed. 

Technical analysis: New 2-month low

Today, EUR/USD printed levels below yesterday’s low of $1.0998, which is the lowest the pair has traded since November 29. Exactly this low of $1.0981 is the next target for the bears. 

As seen in the chart below, the price has penetrated through the ascending trend line (the red line) at $1.1070, which together with the 100-DMA, creates the major support/resistance area. 

The latest push lower also saw the price move below the 61.8% Fibonacci support at $1.1015. As stated earlier, the intra-day target is $1.0980. The hawkish Fed meeting minutes and Powell may facilitate another push lower to target the key short-term support in the area of $1.0880 - $1.0930.

On the upside, the 100-DMA and the ascending trend line are likely to cap any potential rally higher from the EUR bulls. 

Summary 

EUR/USD has moved lower in a continuous manner since the beginning of this year. The major pair has lost more than 2% with the road now open for more losses, following the break of the key support at $1.1070.