EUR/USD Bearish Engulfing to Drive Sell – Brace for a Sell Signal!

Posted Friday, March 12, 2021 by
Arslan Butt • 2 min read
The EUR/USD pair closed at 1.1984 after placing a high of 1.1990 and a low of 1.1916. EUR/USD posted gains for the third consecutive session and reached near 1.2000 level on Thursday amid the weakness in the US dollar despite the dovish ECB tone for the day. At its monetary policy meeting, the European Central Bank opted to leave its benchmark refinancing rates at historic lows of 0% and said it was stepping up its bond-buying stimulus in the coming months. This step was taken to halt the premature rise in borrowing costs in 19 nations of the European Union.

The Pandemic Emergency Purchase Program (PEPP) was unchanged at a total of 1.85 trillion euros that will expire on March 2022. The bond yields in Europe also rose following the rise in the US treasury yields after the US President announced a massive fiscal stimulus plan. More aid to the economy has led to fears that rising yields could derail the economic recovery in Europe by raising borrowing costs for countries that already struggle with the coronavirus crisis. The ECB, however, ensured that the bank’s commitment to more purchases would support the bond prices, and as a result, the borrowing costs will remain lower as bond yields move inversely to the prices. Despite the dovish stance of ECB, the EUR/USD pair continued posting gains on Thursday.

On the data front, from the US side, at 12:00 GMT, the Federal Budget balance showed a deficit of -310.9B against the forecasted-298.6B and supported the US dollar, capping further gains in EUR/USD. At 18:30 GMT, the Unemployment Claims from the last week fell to 712K against the projected 730K and supported the US dollar, and capped further upside momentum in the pair. At 20:00 GMT, the JOLTS Job Openings surged to 6.92M against the estimated 6.65M and supported the US dollar, and limited the upward movement.

The better-than-expected US macroeconomic figures on Thursday could not lift the safe-haven US dollar as the market sentiment was inclined towards risk on the day. The risk flows were supported by the rising hopes of a quick economic recovery after the US President signed the US Stimulus bill into law on Thursday. More aid to the economy increased the hopes for faster recovery, and these hopes were further pushed by the comments of US President Joe Biden. He said that he was very hopeful that all the Americans would have received the coronavirus vaccine shots by the end of May. He urged states, territories, and tribes to get all adults vaccinated by May 1st.

The rising hopes for a return to a coronavirus-free economy also raised the optimism in the market that resulted in more risk flows and less demand for safe-havens like the US dollar. The US dollar weakness added to the upward momentum of the EUR/USD pair on Thursday.

Daily Technical Levels
Support Resistance
1.1936 1.2010
1.1888 1.2038
1.1861 1.2085
Pivot Point: 1.1963

The EUR/USD pair is trading with a bearish bias at 1.1946 level, exhibiting bullish correction, and it’s now likely to head towards a 38.2% Fibonacci retracement level of 1.1902. The pair is staying below the 1.1987 level, and it’s likely to find support at the 1.1900 level. Violation of 1.1900 level can trigger selling trend until 1.1859 mark. Conversely, bullish trend continuation of 1.1901 level can lead EUR/USD towards 1.1902 and 1.1838 level. Good luck!

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