Despite the terrible macro statistics in the USA and the disappointing corporate reports, the S&P 500 index showed growth for two consecutive five days for the first time since the beginning of February.
Earlier, American stocks went uphill thanks to stimulating measures from the Fed and the White House, as well as in the hope that the outbreak of the coronavirus will be taken under control, their success in the week by April 17 was due to the growing confidence in the imminent opening of the American economy. Apparently, market participants believe that US GDP will take the path of a V-shaped recovery, and are trying to be proactive by buying stocks.
At the same time, investors are in no hurry to get rid of the greenback, which has ceased to follow the stock indices, having felt the vulnerability of the positions of its main competitors. The bulls on EUR / USD, in particular, were frightened by the statement of French President Emmanuel Macron that the EU risks falling apart if it does not find a way to share the costs of the current crisis. In addition, rumors are growing in the market that the € 1.5 trillion fiscal and monetary stimulus is not enough, so the ECB can expand the volume of QE.
Although investors considered the plans for the US economy to come back to life voiced by the head of the White House, Donald Trump, as well as the news about the softening of quarantine measures in Germany, Spain, and Italy with a bit of light at the end of the tunnel, it's clear that getting out of it is far away. Therefore, the demand for the dollar as a protective asset remains.
"The sooner medical geniuses can fight back COVID-19 and the sooner European leaders listen to the call of French President Emmanuel Macron for joint efforts to financially recover from the coronavirus pandemic, the sooner the dollar will be able to start its way back," said Keith Jax, strategist at Societe Generale.
On Thursday, the EU leaders plan to hold a videoconference to discuss a coordinated strategy to bring the Old World economy back to normal. They will most likely come around again on the issue of issuing coronabond, which may put pressure on the euro. News of a package of measures to support the economy worth over € 1 trillion would be positive for the single European currency, but this is still an unlikely scenario.
Among other events that should be paid attention this week and which may affect the formation of local trends are the publication of the German economic sentiment index from ZEW (on Tuesday), the release of data on business activity in the eurozone and the USA, as well as on the appeals of Americans for unemployment benefits (Thursday), dynamics of orders for durable goods in the United States (Friday).
As for the technical picture, last week EUR / USD confirmed the breakdown of the multi-week upward trend line, which originates from the annual minimums recorded in March. However, you should wait for a sure bearish breakdown in the area of 1.0815–1.0810 before betting on a further decrease in the main currency pair. Below this support, the pair will aim at monthly lows in the region of 1.0765–1.0770, and then can test levels below 1.0700.
The nearest strong resistance is located around the round mark of 1.0900. Further purchases may trigger a short squeeze to strong resistance near the 50-day moving average in the area of 1.0960, where growth is likely to be restrained. However, a bullish breakthrough of this level can negate a bearish scenario and aim the pair at a breakdown of the psychological mark of 1.1000.