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Jignesh Davda
EUR/USD

After nearly piercing to a fresh monthly high on Friday, the US dollar index (DXY) has turned decisively lower and has shed just over 1%. The greenback continues to be the currency to set the tone for the majors and is once again seen broadly declining against all of the popular currencies.

This trend might be here to stay ahead of Wednesday’s GDP figures which will give insight into how the Coronavirus has affected growth in the first quarter. Analysts are expecting that GDP declined 3.9% on an annualized basis.

In addition to the growth figures, investors will also look to the Fed decision and press conference, also taking place on Wednesday. The central bank is not expected to announce any policy changes after having eased several times last month already.

The unemployment rate in Spain was reported to worsen to 14.4% in the first quarter of 2020 which was ahead of the analyst estimate of 15.6%.

Technical Analysis

EURUSD 4-Hour Chart

EUR/USD has advanced about half a percent on the day and is seen approaching horizontal resistance at 1.0894 which proved to be a major hurdle last week.

Considering that the currency pair briefly pierced to fresh monthly lows last week, there may be a number of traders caught on the wrong side of the current bullish move.

This stands to provide a bit of fuel for the current EUR/USD recovery although tomorrow’s data may set the tone for the pair.

The US dollar index (DXY) has given up a bulk of recent gains and is once again testing a support level at 99.50. This same level served to hold the pair lower last year.

If the dollar fails to hold here, we may see a further advance in EUR/USD above 1.0894 resistance with the next target at the 1.1000 level.

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Bottom Line

  • The dollar continues to decline broadly against its major counterparts.
  • This trend is likely to continue into Wednesday ahead of US GDP figures and the Fed decision.
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