EUR/USD Daily Forecast – Dollar Creeps Higher and Hints of a Bullish Continuation

While fluctuations in oil prices are stealing all the headlines in the financial markets, EUR/USD continues to consolidate within a fairly narrow range to start the week.

Last week the greenback showed some strength, hinting that it may have carved out a bottom after the trade-weighted dollar index (DXY) declined 4.5% in the last week of March.

DXY is now trading once again above the psychological 100.00 handle which introduces downside risks in EUR/USD. A more important level for the index falls at 100.80 as it held DXY lower last week.

It remains to be seen whether the dollar, and by correlation EUR/USD, will see a pick up in volatility within the next day or two.

The most important data releases pertaining to the pair are likely to be survey data from purchasing managers in the services and manufacturing industries. This data is scheduled to be released for both the eurozone and the US on Thursday.

There could be some position squaring ahead of the release. Investors may also look to position ahead of it. Otherwise, there does not appear to be much of a driver for the exchange rate until Thursday.

Technical Analysis

Support at 1.0828 has been holding up the pair in the early week while range resistance at 1.0879 has contained the upside.

My expectation at this point is that any breaches outside of this range will be to entice follow-through buyers or sellers and that we won’t see a true breakout until Thursday, after the PMI data.

In other worse, I expect moves outside of the mentioned range to be faded.

The trend appears to slightly favor the dollar. It will take a sustained break above 100.80 in the dollar index to encourage dollar bulls further.

Bottom Line

• EUR/USD volatility continues to slow and the pair trades within a tight range between 1.0830-1.880 in the early week.
• Thursday’s European and US PMI data stands to move the markets. Range like conditions may continue until then.