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EUR/USD Daily Forecast – Euro Clears Above March Top To an 18-Month High

By:
Jignesh Davda
Published: Jul 22, 2020, 09:59 UTC

EUR/USD continued to march higher in early trading on Wednesday and was last seen trading at levels not seen since January 2019.

EUR/USD

EUR/USD broke to fresh highs not seen since the start of last year on Tuesday and has held near highs despite a slight pullback in the equity markets.

The currency markets have had a strong correlation with the equity markets over the past few months which has led to a notable decline in the dollar. The trade-weighted dollar index (DXY) was last seen trading near lows not seen since early March.

The antipodean currencies are the strongest, as they often gain during times of risk appetite, while the single currency is the third strongest major currency on the week thus far.

Economic data releases have been light in the early week although there are a few releases that could move the markets in the second half of the week.

On Thursday, the US will release its weekly unemployment claims report. This report rarely moves the markets but is considered important as it offers a nearly real-time view of the US labor market.

PMI data will be released on Friday from both Europe and the US. Both the services and manufacturing sectors for the US and Europe have recovered sharply in the last two readings. Analysts expect Friday’s report will show that these sectors have moved into expansion after a sharp contraction earlier in the year as a result of the Coronavirus.

Technical Analysis

EURUSD Daily Chart

The technical breakout in EUR/USD provides confirmation that bulls remain in control. The next possible target for the pair could be at 1.1605 which is a level that was influential on the exchange rate back in 2017 and 2018.

Downside support is now seen at the March top of 1.1495.

The US dollar index (DXY) is approaching its March lows which could offer some near-term support for the dollar. But aside from reaching oversold levels on the larger time frames, the index has not shown any technical signs of reversal at this point.

Bottom Line

  • The bullish trend in EUR/USD remains intact and the pair broke above the March high on Tuesday.
  • More meaningful economic data will be released in the second half of this week. Friday’s PMI data is seen as the highlight for the week.

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

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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