EUR/USD Daily Forecast – Euro Consolidates Near 1.0800 Support

EUR/USD continues to show volatile price behavior as it declined 2.3% last week, well above its typical weekly price fluctuation. The decline wiped out a bulk of the 4% gain from the prior week.

Friday’s weaker than expected US jobs report failed to stop the decline in EUR/USD. The unemployment rate rose 4.4% in March, up from 3.5% in February and against the analyst estimate of 3.8%. The US lost 701 thousand jobs while analysts were looking for a decline of 100 thousand.

The trend of bad data continued on Monday as Sentix reported investor confidence figures for Europe declining to an all-time low. The reporting agency commented that the assessment has never dropped so sharply within a month before and that a quick recovery of the economy was not expected.

Data from Germany was a bit better than expected as new purchase orders with manufacturers declined only 1.4% in February versus the analyst consensus for a drop of 2.7%. Bear in mind that the reporting period was before the Coronavirus threat began to escalate.

Technical Analysis

The dollar dominated the majors last week but the question at this point is whether it will do so again. The US dollar index (DXY) has recovered to the midway point of the decline that took place in the last week of March. That same decline has left a large bearish engulfing candle on the weekly DXY chart.

At the same time, the dollar index last week scaled above resistance at 99.61 which previously held it lower in September and February. It also regained the psychological 100.00 level which is an indication of strength.

EUR/USD shows a similarly mixed view in that the rally in the last week of March had suggested more upside while the past week’s decline has negated the bullish view. At this stage, the pair is essentially trading in a range, even though volatility has been heightened for the last three weeks.

For the session ahead, resistance is found at 1.0925. The pair is currently testing support at 1.0800. If it fails to hold above it, the next area of interest is seen at 1.0655.

Bottom Line

• EUR/USD has posted five consecutive daily declines.
• While the pair has shown volatile swings over the last three weeks, it remains rangebound.