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Euro May Fall if IFO Data Shows COVID-19 Infecting Outlook

Euro May Fall if IFO Data Shows COVID-19 Infecting Outlook

2020-02-24 08:00:00
Dimitri Zabelin, Analyst
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Euro Outlook, German IFO, COVID-19, EUR/USD Analysis – Talking Points

  • Euro could fall on coronavirus fear-infected German IFO statistics
  • Eurozone growth is at risk of being derailed as COVID-19 spreads
  • EUR/USD may challenge December descending resistance channel

ASIA-PACIFIC RECAP: CORONAVIRUS SPOOKS MARKETS

Asia-Pacific markets were met with a rude awakening as coronavirus fears soured risk appetite and sent the anti-risk Japanese Yen surging against the cycle-sensitive New Zealand Dollar and Norwegian Krone. S&P 500 futures dipped over one percent while gold prices gained on expectations that the impact from COVID-19 would bet met with stimulus from central banks and boost the demand for anti-fiat hedges.

GERMAN IFO DATA MAY PRESSURE EURO

Data out of Germany carries a high market premium due to its ranking as the largest Eurozone economy and has been dubbed the “steam engine of Europe”. German business climate data for February is expected to register at 95.3 with the expectations component anticipated to show a 92.1 reading. However, growing concern about the coronavirus and Germany slipping into a recession may cause the data to underwhelm.

Eurozone price growth prospects are looking gloomier by the day with the Euro 5Y5Y inflation swap forward – a favored inflation gauge of the ECB’s – hovering just above the all-time low at 1.1688. Regional economic data has also begun to underperform relative to economist’s expectations and could signal that analysts are overestimating the durability of the Eurozone economy in the face new fundamental forces.

Chart showing Euro 5Y5Y Inflation Swap Forward

EUR/USD TECHNICAL ANALYSIS

EUR/USD has recovered from the lower tier of the two-year support zone between 1.0783 and 1.0828 and may aim to challenge the December descending resistance channel. The pair may bounce back between the slope of depreciation and the floor at 1.0828 until the pair either capitulates or breaks higher. If the former path is taken, EUR/USD may flirt with support at 1.0783 with scope for further losses.

EUR/USD – Daily Chart

Chart showing EUR/USD

EUR/USD chart created using TradingView

EURO TRADING RESOURCES

--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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