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EUR/USD Daily Forecast – Euro Clings to 1.08 Level

By:
Jignesh Davda
Updated: Feb 20, 2020, 13:37 UTC

After a brief early day dip to fresh lows, EUR/USD is seen recovering at the European open, clinging on to the 1.08 handle.

EUR/USD Daily Forecast – Euro Clings to 1.08 Level

The downside momentum in EUR/USD has subsided somewhat and the pair posted a small gain yesterday after declining for the five consecutive sessions before it. Over the last thirteen sessions, the exchange has declined in 11.

While Euro weakness has subsided, the greenback has continued to march higher. The trade-weighted dollar index (DXY) has rallied in the early day to fresh highs not seen since May 2017.

Data from Europe was somewhat mixed with French CPI declining 0.4% last month while German sentiment was better than expected. Survey data revealed that consumers expect the economy to make a slow recovery, yet income expectations declined moderately.

Earlier this week, ZEW economic sentiment showed a downturn in expectations for the German economy as investors and analysts grew concerned over the economic impact of the Coronavirus.

The European Central Bank will release minutes from its latest monetary policy meeting later in the day. The impact might be limited as the view has likely changed with the Coronavirus developments that followed the meeting.

Technical Analysis

EUR/USD has seen an unusual level of downside momentum over the past few weeks. Momentum indicators and correlations point to a clear bearish trend. There is some support lower from here but trying to play the pair to the upside at this point does not appear to be favorable.

At the same time, this does not appear to be a place where investors will get excited shorting EUR/USD or getting long the dollar, speaking strictly from a risk to reward perspective.

EURUSD 4-Hour Chart

A declining trend channel had encompassed price action since the start of the month but bears have failed to protect the upside. Resistance at the 1.08 level is currently holding the exchange rate lower.

The dollar index can offer an early signal for direction in EUR/USD. Often, instruments pullback after breaking to fresh highs which could be supportive for the currency pair. However, it’s important to note, at this point, DXY has not shown any signs of correcting.

Other major currency pairs are showing fresh weakness. The antipodean currencies and Japanese yen have broken to fresh lows versus the greenback over the last 24 hours. The British pound failed to hold above the 1.30 handle despite positive inflation data yesterday.

Bottom Line

  • EUR/USD has fallen into a consolidation since yesterday, however, other major currencies have shown signs of renewed weakness during the same time.
  • The ECB will release minutes from the last meeting. A low impact is expected as Coronavirus developments that followed their last meeting may have altered the outlook.

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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