EUR/USD Daily Forecast – Euro Drops to Multi-Year Low

Dollar Dominates the Popular Currencies this Week

The US Dollar index, which measures the greenback against a basket of the most popular currencies, is on the verge of breaking to a 28-month high. Meanwhile, EUR/USD has broken to an equivalent low and appears to be headed for further losses.

The only major currency the greenback has not gained against this week is the New Zealand dollar. Among the majors, the British pound is the weakest in the week thus far, down roughly 1.5% against the dollar.

Inflation related data releases out of Europe came in weaker than expected earlier today. German import prices declined 0.6% in August versus an expected decline of 0.3%. The consumer price index in France dropped 0.3% this month. Consumer spending was flat last month, also falling short of the analyst estimate.

Later in the day, US durable goods orders and personal spending figures are scheduled for release. The data releases typically do not trigger a volatile reaction in the exchange rate.

As well, the Bureau of Economic Analysis will release the latest PCE price index. Similarly, the release tends to accompany a muted impact on EUR/USD. However, the index is important considering the Fed weighs monetary policy heavily on how close the index is to their 2% objective.

Technical Analysis

EUR/USD has broken down after two failed attempts to break below 1.0930 earlier this month. The pair might continue lower with momentum, however, I think it is important to consider that EUR/USD has had several failed breakouts this year already.

The next area of downside support comes in at 1.0862 followed by 1.0833. We may see volatility pick up in the session ahead as it typically does at the end of the month and end of the quarter.

Previous support at 1.0930 is now seen as resistance. In the event the pair gets above it, further resistance comes in at 1.0966.

Bottom Line

• EUR/USD declined to a 28-month low on Thursday.
• The next downside level of interest falls at 1.0862 followed by 1.0833.
• Volatility might rise as today is the last trading day of the month and quarter.