Where is the turning point?

23 March 2020

By Edward M. Hamman

Senior Technical Analyst

BrunHam Investments Pty Ltd

EUR/USD

Previously, I have discussed about the divergence when EUR crossed over USD to the upside, which could be an indication of change in trend (downtrend to uptrend).

Fig 1.1

But with the COVID-19 issue, we are all in an unsure state of mind about not only ‘what’ is going to happen next, but ‘when’ it is going to happen.

  

Fig.1.2

In Fig.1.2 above, we can see that the bullish movement from the past 2 weeks touched the support and resistance trendline (line–B) before retracing dramatically because of the COVID-19 news. This retracement breached the resistance trendline (line-A) -which a lot of our traders’ thought would become a support trendline- as well as support line-C. If line-A held its support, then the ‘divergence’ would have made sense as it would have made a higher low, changing the EUR/USD to an uptrend. But because it broke through, being the result of the COVID-19, that line-A may hold its resistance until the news blows over.

Fig. 2

Fig. 2 above represents the overbought and oversold signals on a weekly basis. As indicated, the bears were a lot more active than the bulls, until the bulls jumped in and the chart spiked, which was a good bullish signal, which confirms the higher high in Fig.1.1, and the ‘Divergence’ that happened in our previous discussion. But because of the COVID-19 news, the bulls lost power as people invested more in the dollar, resulting an ‘oversold’ indication for the past 2 weeks. Hopefully with the EUR close to being oversold, we could expect the bulls to enter strongly if however economic sentiment picks up and the Covid-19 news fading. 

Resistance key levels: 1.08020; 1.08975; 1.09933

Support key levels: 1.07250; 1.06520; 1.05873

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