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EUR/USD Daily Forecast – Euro Attempts to Recover After Friday’s Fall

By:
Jignesh Davda
Published: Dec 9, 2019, 09:49 UTC

EUR/USD is showing a small gain in early trading on Monday but Friday's price action was firmly to the downside and this momentum might keep recoveries rallies short-lived.

EUR/USD

A Busy Week Ahead

After a few weeks of trading in a narrow range, EUR/USD might see a notable pickup in volatility in the week ahead with several events that the markets will be watching.

From a political standpoint, there are two major drivers for the markets this week. The UK election is one of them and as the outcome stands to impact how Brexit will play out from here, EUR/USD is likely to be affected.

Investors will also be closely monitoring ongoing developments in the trade war between the US and China. On December 15, planned tariffs are to take effect and therefore there is some expectation for a resolution ahead of it so that these tariffs can be canceled.

Trump said last week that trade talks are going smoothly but neither confirmed or denied that things were on pace for a resolution by December 15.

Aside from political events, the week ahead will provide some forward guidance from the Federal Reserve and the European Central Bank.

The Federal Reserve meets on Wednesday and the ECB meets on Thursday. Both are expecting to keep monetary policy on hold at their last meeting of the year.

Technical Analysis

Friday US jobs report was stronger than expected and triggered a broadly stronger dollar. This led to a fall in EUR/USD below a fairly notable level at 1.1072.

EURUSD 4-Hour Chart

The late-week sell-off has resulted in a fake break out above the weekly 20 moving average. This, combined with other factors, stand to keep the pair under pressure in the early week.

The 1.1072 has been a respected level on a daily chart for most of the second half of the year. I see this level as major resistance for the session ahead.

EURUSD Daily Chart

Support at 1.1053 has been holding the exchange rate higher on a 4-hour chart on a candle close basis. Further support is found near Friday’s low as the 20-day moving average comes into play.

Bottom Line

  • The downward momentum from Friday stands to keep EUR/USD rallies short-lived.
  • We might see a narrow range in the early week as well-defined support and resistance levels are in proximity. However, there are quite a few risk events this week and a rise in volatility appears likely.

About the Author

Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.

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