EUR/USD Daily Forecast – Dollar Range Break Weighs on Euro

US Dollar Signals More Upside

EUR/USD has been weighed by a stronger dollar in the week thus far with the greenback advancing against all of the major currencies. The US dollar index (DXY) has broken higher from a nearly two-week range, signaling more gains to come.

Tensions between the US and Iran have eased after Trump’s speech on Wednesday, and the markets have responded. Gold prices have given back gains for the week after briefly topping $1600 to trade at seven-year highs. Safe haven currencies like the Japanese yen and Swiss franc have also given up their gains and reversed lower.

The flight to safety and subsequent return to risk appetite this week has not had a significant impact on EUR/USD, although volatility seems to have increased in the dollar pairs. With the markets calming, volatility might slow in the session ahead. But that should be short-lived as the US jobs report is due tomorrow.

Analysts are expecting Friday’s report to show the unemployment rate hold steady at 3.5% while the forecast for December’s job gain is for 162 thousand additional workers. Average hourly earnings are expected to tick up to 0.3%.

Technical Analysis

The upside break in the dollar index will tend to keep pressure in EUR/USD although the pair is approaching notable support.

On a 4-hour chart, the pair is currently lingering around the 200 moving average. This is the same indicator that held the exchange rate higher on the dip during the holidays.

The daily chart shows a strong support confluence slightly lower near 1.1078. This reflects support from a horizontal level as well as a rising trendline that originates from the October low.

Yesterday’s decline served to break the pair below the 200-day moving average. This indicator, currently residing at 1.1140, is seen as resistance for the session ahead.

Bottom Line

• EUR/USD rallies are likely to be short-lived after the bullish range break in the dollar index.
• The currency pair broke down below its 200-day moving average yesterday. The indicator is now seen as upside resistance.
• Volatility may slow ahead of Friday’s US jobs report.