Euro May Fall with DAX Index as Coronavirus Spreads into Europe

Euro, DAX, EUR/USD, EUR/CHF – Talking Points

  • Euro may fall with DAX index on coronavirus fear
  • Germany has reported its first case of the disease
  • EUR/CHF is on the cusp of testing five-year lows

The Euro and DAX index may extend their declines in the upcoming session as fear over the coronavirus continues to infect sentiment and pressure equity markets. On January 27, the S&P 500 clocked in its worst day since October 2, with EUR/USD declining almost one percent in less than a week. Amid the market panic, the anti-risk Swiss Franc has spiked vs the Euro with EUR/CHF now testing five-year lows.

Coronavirus Infecting Market Mood

Fear about the spread of the coronavirus and the slowdown in economic activity which it may wrought could catalyze a further selloff in EUR/CHF and the DAX index. Germany, the largest Eurozone economy, recently reported its first case of the virus, spreading the fear that a wider regional infection could batter the region’s growth prospects which only recently began to show signs of stabilization according to the IMF.

EUR/CHF Technical Analysis

EUR/CHF has declined almost half a percent since it broke below key support at 1.0732 and is now trading less than one percent away from a five-year low at 1.0610. The pair will now have to surmount support-turned-resistance in addition to descending resistance that emerged following the bearish engulfing on December 2, 2019. Having said that, recent price action suggests a modest recovery may be in the cards.

EUR/CHF – Daily Chart

EUR/CHF created using TradingView

EUR/CHF – Monthly Chart

Chart showing EUR/CHF

EUR/CHF created using TradingView

DAX Index Selloff Ahead?

The German benchmark DAX equity index has retreated almost three percent since testing its 2018-high at 13596.89 and has broken below the October 2019 uptrend. The severe gap lower is part of a trend in global equity markets amid panic from the coronavirus. Selling pressure may alleviate as the index approaches support between 12948-12886, though a downside breakout with follow-through could catalyze an aggressive selloff.

DAX Index – Daily Chart

Chart showing DAX Index

DAX Index created using TradingView

EURO TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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