EUR/USD Daily Forecast – Consolidation Takes Place Below Resistance

The momentum-driven rally in EUR/USD seems to have stalled out a bit as a confluence of resistance has brought in sellers.
Jignesh Davda

EUR/USD Shows Resilience

Although resistance is in play for EUR/USD, the pair is showing some resilience here as it is not backing down. The pair has been consolidating around the 1.1200 handle for two days as short-term dips have been bought.

The week started with a lot of volatility as trade war headlines dominated but this volatility has since eased. Equities have recovered some losses, the dollar has fallen into a range, and even bonds have now started to pull back a bit.

A relatively quiet economic calendar in the session ahead means that volatility can remain like this, unless there are some headlines to move the markets.

Fed members Evans offered his latest view on monetary policy yesterday and was dovish. He argued that although the economy is performing relatively well, subdued inflation levels alone make the case for lower rates. Add to that risks from an ongoing trade war and further easing appears inevitable.

Technical Analysis

Yesterday’s report highlighted the confluence of resistance that has capped the EUR/USD rally here. To recap, there are several moving averages in play here.

EURUSD 4-Hour Chart

On a 4-hour chart, the 200 moving averages has held recent advances. On a daily chart, the 50 and 100-day moving averages have converged around 1.1230 to offer a strong confluence. In addition to the moving averages, there is also a declining trendline that originates from the late June high.

So far, EUR/USD has posted two consecutive daily doji’s which is indicative of exhaustion. However, as mentioned, the pair is showing some resilience here. The fact that it has not sold off despite the somewhat overwhelming technical evidence that it should shows strength.

EURUSD Daily Chart

For that reason, I would not rule out another push higher here, even if it is just to trigger some stops from the early week high. If this were to happen, I would be looking out for the 61.8% Fibonacci retracement measured from the late June high. It comes in at 1.1265. Beyond that, I see a horizontal level at 1.1276.

To the downside, I consider 1.1188 to be major support here. There have been some minor breaches below the level, but seems to be containing the recent range well.

Bottom Line

  • A consolidation has taken place in the past few days as the market reaction to the latest developments in the trade war have started to fade.
  • The economic calendar for the session is light, low volatility is likely to prevail.
  • There is major overhead resistance in play here, but EUR/USD shows strength as there hasn’t been a show of strong selling in the past two days.
Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.