EUR/USD Price Corrects Lower As Italy Decides To Close Schools and Universities

EUR/USD trades 0.5% lower today in what looks like the beginning of a correction after the pair gained around 400 pips in just 8 days. Italy’s decision to close schools and universities to contain the worst coronavirus outbreak in Europe seems to be weighing on the EUR.

Fundamental analysis: Upbeat USD data, Italy to close schools

After the Federal Reserves decided to cut interest rates by 50bp yesterday, which helped the EUR make additional gains against the USD, the roles have reversed today as the EUR bulls seem to be on the back foot.

The situation in Italy is also not helping the EUR, especially after the Italian government decided to close schools and universities across the country for two weeks in an attempt to contain the further coronavirus outbreak in Europe.

On the data end, the US ISM data for February came in higher-than-expected. Here is the overview of the data published today:

ISM Non-Manufacturing New Orders Index (Feb): 63.1 versus 56.3 expected

ISM Non-Manufacturing PMI (Feb): 57.3 versus 54.9 expected

ISM Non-Manufacturing Employment Index (Feb): 55.6 versus 54.1 expected

ISM Non-Manufacturing Prices Paid (Feb): 50.8 versus 54.5 expected

Technical analysis: More room for correction

EUR/USD created one of the more impressive bull runs in the recent years after it travelled almost vertically from $1.0778 to $1.1213 in only eight days. The move was fueled by the anticipation of Fed cutting rates, which happened yesterday.

However, the traders feel the situation has gone out of control given the coronavirus-related situation in Europe and Italy specifically, which has prompted the pair to correct lower today and test the previous resistance, now support at $1.1095. The pair has rebounded since tagging the support earlier today.

This level remains the key short-term support for EUR/USD, while $1.1060 offers additional support lower. On the upside, a weekly close above $1.1180 would be of huge importance for the bulls and it could create a base for a move towards the $1.14 handle.

Summary

EUR/USD has corrected lower today after Italy decided to close schools and universities for two weeks in a bid to contain further coronavirus outbreak. The USD has also been helped by the upbeat US ISM data.