EUR/USD Daily Forecast – Euro Decline Pauses as DXY Nears 2019 High

The euro has been under a significant amount of pressure in the month thus far and has declined over two and a half percent against the greenback. EUR/USD has only posted one positive session over the last 12 and trades at lows not seen since early 2017.

Economic sentiment in Germany was reported to turn sharply lower. The ZEW indicator fell 18 points to a reading of 8.7, well below analysts estimates. Concerns over the Coronavirus weighed on sentiment and ZEW President Professor Achim Wambach commented: “economic development is rather fragile at the moment.”

The US dollar has advanced in the month thus far, although the strength has not been broad-based. Three of the major currencies have made small gains against the greenback since the start of February while the Euro shows the biggest loss among the majors.

Apple’s Coronavirus warning triggered a sharp fall in the global equity markets on Tuesday although most of the global indices are seen recovering in the early day. The German DAX is up about half a percent shortly after the European open, recovering two-thirds of Tuesday’s loss.

The sudden shift to risk aversion provided a catalyst for a rally in gold prices towards highs not seen since the US-Iran escalation in early January. The yellow metal has extended the upward momentum in the early day and trades firmly above $1600. Gold is up about 4% against the euro and broke to a fresh record high last week.

Technical Analysis

The downside momentum continues to remain strong for EUR/USD. The slight pause at 1.0800 is not providing any reason to believe the pair will recover from here.

Technical traders will be focused on a horizontal level at 1.0729. This level reflects resistance in early 2017 ahead of the notable gap up as a result of the French election.

The currency pair reached oversold territory last week and the RSI reading on a daily chart is at levels not seen since May of 2018.

A downward trend channel has encompassed the decline thus far and EUR/USD is currently seen hovering around the upper bound of the channel.

Bottom Line

• EUR/USD has fallen nearly every day this month and the momentum remains firmly to the downside, despite a slight consolidation in the early day.
• Sentiment deteriorated in Germany over concerns of the Coronavirus.
• The next downside target for EUR/USD falls at 1.0729.