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EUR/USD Daily Forecast – 20-Day Moving Average Resistance in Sight

By:
Jignesh Davda
Published: Feb 26, 2020, 10:13 UTC

EUR/USD extended higher for a third consecutive day on Tuesday after US consumer confidence figures fell short of expectations.

EUR/USD

EUR/USD continues to push higher in a recovery that began last week and has erased about a third of the losses from the decline that began at the start of the month.

The pair has been posting a bulk of its gains during North American trading hours as of late and yesterday’s gain was attributed to a weaker dollar following US data.

The Conference Board reported a slight improvement in its confidence index for February, although figures were fell short of the analyst estimate. The report indicated that the number of people optimistic about the short-term outlook increased while those expecting conditions to worsen decreased. There was no specific mention of the Coronavirus and whether it played a role in consumer views of business conditions.

Federal Reserve member Kaplan commented yesterday that it might be too soon to decide if the Coronavirus warrants a rate cut in the United States. The futures markets have been more aggressive in pricing in a rate cut and show a roughly 80% probability of a rate cut in June. This is up significantly from the 50% probability priced in last week.

Technical Analysis

EUR/USD is approaching resistance from its 20-day moving average, an indicator it has not tested since the start of the month. It currently falls at 1.0910 and is likely to draw some sellers.

To the downside, the 1.0833 level held a decline yesterday and remains an important support level for the currency pair.

EURUSD Daily Chart

A break above moving average resistance shows further barriers at 1.0956 followed by the psychological 1.1000.

While the short-term direction has certainly shifted to the upside for EUR/USD, upward momentum has been lacking in the recovery. Sellers will likely look for areas to enter and the 20-day moving average might be one of them.

On a weekly chart, the currency pair posted a doji pattern which signals exhaustion from the prior downward move and stands to keep the pair bid in the week ahead. It might take a drop back below 1.0800 to turn the near-term sentiment to bearish.

Bottom Line

  • EUR/USD is attempting to close higher for a fourth consecutive day.
  • The 20-day moving average offers resistance at 1.0910 for the session ahead.

About the Author

Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.

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