EUR/USD Daily Forecast – Euro Attempts to Post a Fifth Straight Day of Gains

The trends in the broader markets remain intact as a risk appetite continues to drive the equity markets and precious metals higher while the dollar has been under steady pressure.

In the month thus far, the trade-weighted dollar index (DXY) is down about 2.6% while the S&P 500 is trading at levels not seen in nearly five months. The price of gold has rallied to levels not seen since 2011 and is not all that far away from all-time highs.

Hopes of vaccine and support from the governments and central banks have been driving the appetite for risk, causing investors to turn a blind eye to rising virus cases and tensions between the US and China.

An improvement in the economy has also been a major factor. Tomorrow, the latest PMI data will be released from the US and from Europe. The data is expected to show that both the services and manufacturing sectors in both countries have pushed into expansion after the earlier steep contraction.

Later during the North American session today, the US will report its weekly jobless claims. After declining for 15 straight weeks, analysts expect the report to show 1.3 million new claims, unchanged from the prior week.

Technical Analysis

EUR/USD appears poised to make a run at the 1.1600 level. This level is considered important as it acted as support in both 2017 and 2018. It also acted as resistance in 2016.

Considering how strong correlations have been as of late across the markets, it is worthwhile keeping an eye on other assets that appear to be running into resistance.

Gold for example faces resistance from prior highs in 2011. The S&P 500 might see some sellers as it also nearing all-time highs. SPY is currently trading above $323.50, this level reflects the highest monthly close for the index, a drop back below it could trigger a more meaningful pullback.

Bottom Line

• A strong appetite for risk is driving the equity market higher and the dollar lower.
• The 1.1600 level in EUR/USD could prove to be a major hurdle as other correlated assets are also approaching notable resistance.

For a look at all of today’s economic events, check out our economic calendar.