EUR/USD Daily Forecast – Euro Dips Below 1.0900 as the Dollar Recovers

The dollar is driving the major currencies and a recovery since yesterday is weighing on EUR/USD.

The currency pair had already declined notably ahead of yesterday’s US retail sales report which revealed sales declining by a record 8.7%.

A shift in the market place is attributed to the weak sales report. Since yesterday, currencies that are typically associated with risks, such as the New Zealand and Australian dollar, have come under pressure. Meanwhile, currencies that are viewed as safe-havens like the Japanese yen and Swiss franc have only shown minimal losses against the dollar.

The equity markets have pared back gains although yesterday’s decline does not appear all that significant compared to recent price action. Despite the decline, the S&P 500 is still up 28% from a low posted less than a month ago.

Investors will look to today’s US jobless claims report to further assess the condition of the US economy. Analysts expect it show 5.4 million new claims last week, slightly lower from 6.6 million reported in the last two consecutive readings.

Technical Analysis

There are a few considerations for EUR/USD and they all circle back to the dollar.

The main consideration is if the markets will go into a full-blown period of risk aversion after yesterday’s weak retail sales data.

But in addition to that, if the markets shift to risk-off, the question remains whether the dollar will rally. At least, with the same momentum it did last month.

My view here is that it won’t. The dollar has firmed and will likely see more upside. However, last month’s price action was extraordinary as investors reacted in fear and uncertainty to the Coronavirus outbreak.

Therefore, I expect support between 1.0788 to 1.8030 to cap the decline in the currency pair this week.

Rallies over the near-term are likely to be met by sellers considering yesterday’s price action. Resistance for the session ahead is found at 1.0923.

Bottom Line

• The dollar has signaled a bullish reversal and rallies in EUR/USD over the near-term are likely to be sold.
• Investors will look to today’s US jobless claims report after retail sales declined at a record pace in March.