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EUR/USD Plunges to Multi-Year Lows, German GDP Predicted to Slump in Q2

EUR/USD Plunges to Multi-Year Lows, German GDP Predicted to Slump in Q2

2020-03-19 13:30:00
Nick Cawley, Analyst
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EUR/USD Price, News and Analysis:

  • EUR/USD slumps to 1.0750 after ECB announces EUR750bn of Pandemic-QE
  • IFO predicts German Q2 GDP to slump to -4.5%.
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EUR/USD Throws in the Towel and Breaks Technical Support

We wrote yesterday that the ECB needed to respond the economic threat posed by the coronavirus immediately, and later in the day the central bank did just that, announcing a fresh EUR750bn pandemic QE program to run through until at least the end of 2020. The ECB also left open the door for further monetary action if needed:

The Governing Council will do everything necessary within its mandate. The Governing Council is fully prepared to increase the size of its asset purchase programmes and adjust their composition, by as much as necessary and for as long as needed. It will explore all options and all contingencies to support the economy through this shock.

Euro Struggles to Hold 1.1000 Against a Rampant US Dollar

Further action may be required if the latest predictions by the German IFO materialize. While global second-quarter GDP figures are expected to show recessionary forces building, IFO’s estimation of Q2 German GDP at minus 4.5% is aheadline-grabbing prediction and one that policy makers need to heed. German unemployment is also expected to rise from 5.0% in 2019 to 5.3% in 2020.

IFO Economic Forecast Spring 2020 – The Economy Slumps

The US dollar (DXY) continues to rise to fresh highs and a break above 103.85 will see the greenback at highs last seen in 2003. The US dollar is the dominant safe-haven of choice and is likely to remain so in the short-term.

Against these forces, EUR/USD has finally broken lower, opening the way for further losses. The 1.0777 level was tested on February 20 this year and prompted a sharp bounce back to 1.1495 in less than three weeks. The break below 1.077 needs to be confirmed by a close below this level and will likely see the pair test older support levels between 1.0340 and 1.0569, made in the first two months of 2017. Traders should remain on notice that the current unprecedented market conditions will be met by unprecedented central bank action. Volatility levels will remain at current multi-months and price action will be wild and fast as central bankers battle the spread of coronavirus.

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EUR/USD Daily Price Chart (August 2019 – March 19, 2020)

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EUR/USD BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 20% -6% 6%
Weekly 62% 8% 32%
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Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on EURUSD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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