EUR/USD Daily Forecast – Euro Bounces but Upside Appears Limited

Markets Shrug Off Trump Impeachment

The market reaction to yesterday’s impeachment ruling has been surprisingly muted. Gold prices, a proxy for risk, as well as equity markets in Europe are mostly flat shortly after the European open.

The US Dollar index is seen edging lower, on pace to end a two-consecutive day bullish streak. EUR/USD is seen recovering higher, although a major technical hurdle is within proximity.

Legendary investor Stanley Druckenmiller shared his positions in the markets in an interview with Bloomberg on Wednesday. His currency holdings reflect clear risk-on sentiment as he is long the commodity currencies and short the Japanese yen. He discussed having a long position in Sterling ahead of the UK election but it was not clear if he is still holding that position. Druckenmiller was quite transparent about his disapproval of US monetary policy. He stated that easy policy is not warranted considering the state of the economy and markets.

The economic calendar is relatively light concerning EUR/USD in the session ahead. Investors will tend to focus on Sterling as the Bank of England will announce their latest rate decision.

Technical Analysis

While EUR/USD is showing a bit of upside momentum, there are a few reasons it might be too early to call a low in place.

Once concern for bulls is the 200-day moving average which capped the upside in the first half of the week. Another issue that can’t be ignored is the general lack of volatility. With the holidays coming up next week, and a light economic calendar this week, there’s little reason to believe the currency pair will see volatility increasing.

There is also the matter of a recent trendline break. The decline in EUR/USD yesterday served to drive the pair below a rising trendline that originates from a low posted towards the end of November. Sellers may try to defend a restest of this trendline with further resistance coming in at the 200-day moving average, currently near horizontal resistance at 1.1149.

Bottom Line

• EUR/USD carries a slight bearish bias following a trendline break and rejection from the 200 DMA.
• Major resistance for the session ahead falls at 1.1149.