EUR/USD Forecast: Where next from 1.08? Italian hopes battle potential greenback comeback

• EUR/USD has been trading around 1.08 amid the Senate's stimulus package and hopes from Italy.
• A potential dollar recovery alongside a retreat in stocks may weigh on the pair.
• Wednesday's four-hour chart is painting a mixed picture.

"At last, we have a deal," – said US Senate majority leader Mitch McConnell after long days of intense negotiations between Republicans and Democrats. The world's largest economy is deploying over $2 trillion to mitigate the economic fallout from coronavirus and the economic paralysis it entails. 

The safe-haven US dollar remains under pressure, and stocks are cheering – but perhaps the upside in equities is already behind us, as markets staged a massive rally on Tuesday. The Dow Jones Industrial Average advanced by the most substantial level since 1933 – during the peak of the Great Depression. If share price retreat on a "sell-the-fact" response to the deal, the greenback may stage a comeback. The surge was also fueled by the Federal Reserve's open-ended Quantitative Easing program announced on Monday. 

See When will the Corona market end? Or has it already?

The effort by Washington comes as additional states and cities impose lockdowns in order to stop the spread of Covid-19. Moreover, the World Health Organization said that the US might turn into the new epicenter of the disease, especially as cases in New York are surging at a rapid pace. Total infections in the world's largest economy stand at around 55,000, more than in Spain.

President Donald Trump aims to end the restrictive measures by Easter, around April 12, but health officials caution that it may be too early. The damage to the economy may risk his reelection chances. 

In the old continent, coronavirus-related deaths topped 700 on Tuesday, increasing after two days of declines. There is a silver lining to the depressing news – the number of active cases is declining gradually. The eurozone's third-largest economy's strict shutdown measures expire on April 3, but will likely be extended. Any additional positive sign from Italy and especially from the embattled region of Lombardy may boost the euro.

Markets are focusing on government action rather than economic figures. Wednesday's US Durable Goods Orders statistics for February predate the crisis and will likely be ignored. Updates on coronavirus cases in Europe and the US are eyed. The global number of infections has surpassed 420,000, and the death toll is around 19,000.

Investors shrugged off Markit's preliminary Purchasing Managers' Indexes for March. On both sides of the Atlantic, services PMIs plunged below 40 – reflecting depression, while manufacturing PMIs held up just below 50, representing mild contraction. Nevertheless, industrial sector figures were propped up by a subcomponent that counts delays as a decisive factor – a quirk that may fade in the next report. 

EUR/USD Technical Analysis

Momentum on the four-hour chart has turned to the upside, a positive development, yet EUR/USD still trades below the 50, 100, and 200 Simple Moving Averages. The picture is improving.

Resistance awaits at the daily high of 1.0840, followed by 1.0880, Tuesday's peak, which also converges with the 50 SMA. The next levels to watch are 1.0950 and 1.1050. 

Support awaits at 1.0750, Tuesday's low, and then by the 2020 trough of 1.0640. Further down, 1.0580 dates back to 2017 and is of interest. 

More Have stocks bottomed out? Not yet, wait for these three coronavirus-related developments