EUR/USD OUTLOOK, CORONAVIRUS, EUROZONE GROWTH– TALKING POINTS

• Euro may fall if coronavirus undermines eurozone growth prospects
• Japanese GDP on an annualized, QoQ basis plunged to six-year low
• EUR/USD hovering at 3-year lows – Is a bounceback in the cards?

ASIA-PACIFIC RECAP

Asia-Pacific equities were mixed heading into Monday’s session after annualized, quarter-on-quarter Japanese GDP data printed its weakest reading since 2014. APAC markets appeared to be un-phased by the statistics, but Japan’s export-driven economy – with the majority of cross-border sales headed to China – may highlight weakening demand from the Asian giant. The implications of a significant slowdown there could have a broader market impact and could stoke recession fears.

EURO AT RISK FROM CORONAVIRUS

The Euro may continue to slide against the US Dollar and Swiss Franc if fear about the impact of the Coronavirus on Eurozone growth prospects fuels ECB easing expectations. Regional economic data has started to underperform relative to economists’ expectations, retracing some of the recovery analysts recorded since mid-October of 2019.

Regional growth was showing signs of stabilization amid a détente between the US-China and the signing of “Phase 1” of their multi-sequential trade deal and reduced fear about the prospect of a no-deal Brexit. The coronavirus was an unexpected element that infected sentiment and proved to be yet another fundamental tailwind the Eurozone now has to contend with.

This comes after Eurozone GDP data showed a 0.9 percent growth rate for the fourth quarter and missed the 1.0 percent estimate. The German economy – the largest in Europe – was stagnant for Q4 on a three-month timeframe, which may send a chilling effect to its neighbors. Slower regional growth could then stoke ECB rate cut bets and further pressure the Euro as EUR/USD hovers at a 2017-low.

EUR/USD TECHNICAL ANALYSIS

EUR/USD appears to be showing signs that it is bottoming out after suffering a 1.40 percent decline since it broke the support zone between 1.0989 and 1.0981 (parallel white-dotted lines). If the pair recovers, the next major resistance barrier will be the December downtrend (labeled as “Beta”). It has been guiding EUR/USD lower before the slope of depreciation steepened in early February at 1.1091 (gold-dotted line).

EUR/USD – Daily Chart

EUR/USD chart created using TradingView