- EUR/USD is on the offer as coronavirus is spreading in Italy.
- The bulls need a better-than-expected German IFO reading.
The selling interest around the single currency is looking to gather steam amid reports stating a rise in the number of coronavirus cases in the north of Italy.
The common currency is currently flashing red at 1.0822, having opened the week well below the 200-hour moving average (HMA) at 1.0834.
Focus on Italy
The number of coronavirus cases in Italy’s Lombardy region jumped to 89 on Sunday from 54, leaving the country with 150 confirmed infection – the highest in Europe and about five times that of Germany.
Notably, the number of cases has risen sharply in less than a week and could stoke fears of broader contagion. After all, Italy is part of the Schengen borderless travel area.
As a result, the EUR is likely to remain on the offer in Europe. The selling pressure may weaken, allowing a bounce if the for-ward-looking German IFO – Expectations (Feb) index betters estimates by a big margin, forcing markets to scale back expectations for recession.
From the technical perspective, the pair needs to climb above the last week’s high of 1.0864. That would validate the seller exhaustion signaled by the last week’s bullish hammer candle and could yield a notable corrective rally toward 1.10.