EUR/USD Daily Forecast – Euro Continues to Range Below 200 DMA

EUR/USD Little Changed on Mixed Data

Producer price index figures from Germany showed no change in November and a decline of 0.7% compared to the same month a year earlier. The figure fell short of the analyst expectation but did not have much of an impact on the exchange rate.

The ifo institute’s business climate survey, on the other hand, came in better than expected, rising to 96.3 for December compared to an upwardly revised 95.1 in the prior month. The data shows signs that the manufacturing slump in Europe might be nearing an end although the latest PMI data seems to suggest differently.

EUR/USD has struggled to move higher in the early week as the 200-day moving average has come into play. The pair last tested this indicator in June although it has not traded above it consistently since April 2018.

Later in the day, the latest consumer price index numbers will be released out of Europe. Analyst are expecting a rebound to 1% in annual CPI after declining in the prior two releases.

Technical Analysis

EUR/USD has made two intraday attempts to scale above the 200-day moving average. Both have resulted in reversals which is indicative of selling pressure.

At the same time, the pair has managed to stay somewhat glued to the indicator for the last few days. In this context, there’s not enough evidence to confidently say that the pair could pull back from here.

The inversely correlated US dollar index (DXY) posted a recovery on Friday that resulted in a bullish engulfing candle on a daily chart. This signaled more upside potential for the greenback although the rally has since fizzled out.

There is a confluence of resistance for DXY in around 97.68 as the 200 and 20-day moving averages have converged in that area. The moving average confluence might act as a magnet for DXY which would drag EUR/USD lower.

Bottom Line

• EUR/USD was mostly unchanged following mixed data out of Germany
• The 200-day moving average is in play for EUR/USD. The pair is at risk of a pullback while below the indicator.