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EUR/USD Violates Upward Channel - Risk-Off Market Sentiment Plays! 

EagleFX

The EUR/USD currency pair failed to extend its previous-day winning streak and dropped to 1.1260 level mainly due to the risk-off market sentiment, which underpinned the broad-based U.S. dollar and contributed to the pair's declines. However, the currency pair losses could also be attributed to the lack of any positive news that could restore the risk sentiment. Moreover, the rising number of coronavirus cases weighed on the European equities, undermining the shared currency. At this moment, the EUR/USD Currency Pair is currency trading at 1.1265 and consolidating in the range between 1.1259 - 1.1291. However, the traders did not give any major attention to the EU Donohoe's comment that he believed there was a way to reach an E.U. recovery fund agreement.

Due to the worsening situation of coronavirus, the latest optimism over a swift global economic recovery faded rather quickly after the U.S. cases crossed a total of 3.0 million marks and reported over 60,000 cases on Thursday. Furthermore, over 12.2 million cases and 550,000 deaths globally were reported as of July 10, as per John Hopkins University data. Most states like Florida, Texas, and California, said a record-high number of new cases on Thursday. However, the risk-off flow might continue to underpin traditional safe-haven currencies.

Although, the traders seemed cautious to place any strong position due to the worries that the U.S. decision to sanction Chinese officials over human rights violations in Uighur province could fuel further escalation between Sino-US tension. The Australian-China diplomatic relations over the Hong Kong issue also favored the risk-off mood and kept the euro bulls on the defensive.

On the positive side, the German Chancellor Angela Merkel urged European Union countries to agree on a major economic recovery package quickly. She said that pandemic couldn't be fought with lies and disinformation, and neither can it be with hatred and agitation. Merkel criticized world leaders who promoted lies and disinformation and said that pandemic had exposed those who rely on fact denying populism.

It is worth mentioning that the coronavirus has killed more than 100,000 people in 27 European Union countries. Considering the worst situation of the virus, Merkel's urged Italy and Spain's leaders to impose long-term shutdowns. She requested the European Union members to agree at a summit next week on "ambitious conditions" for the recovery fund to help get economies back on the right track.

At the USD front, the broad-based U.S. dollar flashed green and took bids on the day as investors preferred the safe-haven asset mainly due to concerns about the mounting coronavirus cases. However, the gains in the U.S. dollar kept the pair under pressure. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies gained 0.13% to 96.802 by 10:06 AM ET (3:06 AM GMT). In the absence of the major data/events to be released on the day, the market traders will keep their eyes on the USD price dynamics and coronavirus headlines, which could play a key role in influencing the intraday momentum.


Daily Support and Resistance

S1 1.1137

S2 1.1226

S3 1.1279

Pivot Point 1.1315

R1 1.1368

R2 1.1405

R3 1.1494

On the 4 hour chart, the EUR/USD has violated the upward channel, providing support at 1.1300 level. The pair is gaining support at 1.1260 level, although the bearish channel breakout should drive sharp selling in the pair, it should violate the 1.1260 level to drop further until 1.1219 level. The 50 periods EMA is also supporting selling bias, and closing of candles below 1.1260 can help us capture further selling in the EUR/USD pair. With that being said, I will prefer to take a selling trade as soon as the 1.1260 level is violated. Good luck!

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