“All through time, people have basically acted and reacted the same way in the market as a result of greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis”.
The Single currency fell to a low $1.1335 today from a high of $1.1495 on Monday as hope that global central banks would introduce stimulus to cushion the economic impact of the coronavirus outbreak boosted the appetite for riskier assets.
Market attention would now shift to the ECB event on Thursday. Even though euro zone rates are already deeply negative, the central bank will be under strong pressure to act as the European outlook seems to be worsening.
“It took Giuseppe Conte, Italy's PM, less than 48 hours to move from locking down only the north of the country to all the country. In a dramatic press conference late on Monday, Conte announced that severe restrictions will apply to all the Eurozone’s third-largest economy. Italy's cases jumped to above 9,000 with mortalities nearing 500.
In addition, Spain announced it is closing schools in the most affected areas, including the capital region of Madrid. France bans gathering of 1,000 people and Germany confirmed the first deaths from coronavirus on Monday.
Concerns around Europe may later weigh on markets and send investors back to the safety of US debt, weighing on EUR/USD.-
On the hourly chart, the rally on the EUR/USD, starting in late February from a low of $1.0782 to as high as $1.1495 on Monday may have been too far too fast.
From an Elliott wave perspective, the pair may have completed wave 3) on Monday and could be heading south in the coming days, probably to previous wave 4 of a lesser degree at $ 1.1100, completing wave 4) of an impulsive trend.
On the flipside, a break above previous high @ $1.1495 could open the door for further gains near $1.1525 followed by $1.1579.