EUR/USD is in a deep corrective phase but when is it a trend reversal?

• EUR/USD is trading 0.14% lower on Friday and the USD remains firm.
• There are question marks on when the Euro recovery fund will be finalised.

EUR/USD 4-hour chart

There is been lots to digest on Friday regarding the COVID-19 crisis and the Eurogroup recovery fund. Firstly, the COVID-19 cases continue to rise in some of the key states in the US and this led to some more safe-haven flow into the US dollar. Interestingly the greenback weakened against some of the EM currencies like the ZAR and RUB but pushed higher against the EUR and GBP. 

There have been lots of comments coming out of the EU council meeting and most of them point to more complications and a July resolution. Dutch PM Rutte said he is unsure if the EU will reach a deal on the recovery fund even in July. While the EU Commission President Von Der Layen said the discussion was very positive. Swedish PM Lofven noted that the group remains "fairly far" from a deal regarding the fund and the budget and lastly Danish PM Frederiksen was hopeful that a July deal was possible. 

Looking at the chart, it is clear the price is making lower highs and lower lows. There is a wedge formation and an acceleration below could mean that the price is going to hit lower levels. If the pair breaks the pattern to the upside we can then confirm that this move lower was just a deep correction. One thing is for sure the red support line at 1.0971 is a pretty low target. 

The Relative Strength Index and MAD confirms the bearish theory but they indicate there could be a pullback before the move continues. The MACD signal lines have now crossed over to the downside to match the red histogram bars. The Relative Strength Index is near the oversold level and confirms the negative bias.

Additional levels