EUR/USD Daily Forecast – Euro Eases Lower After Test of 1.1350 Resistance

The week started with a renewal of upside momentum for EUR/USD although important overhead resistance has capped near-term gains and the exchange rate is holding within a broader range that has been playing out for a few weeks.

The US dollar is bouncing broadly higher in early trading today as the markets have shifted to a risk-off stance with the S&P 500 set to open nearly 1% lower while gold prices have broken to fresh seven and a half year highs.

Survey data from purchase managers in both the US and Europe showed their respective economies recovering for a second consecutive month. Yesterday’s report from IHS Markit showed the US services PMI rising to 46.7 while the manufacturing PMI printed at 49.6.

Based on the PMI data, analysts at Markit expect the US economy to contract 8% in 2020 which is a smaller contraction than previously anticipated.

The New Zealand dollar is the weakest major currency in the early day. It fell under pressure after the Reserve Bank of New Zealand said it stands ready to act further if need be, to counter the negative economic impacts of the virus. This was in contrast to most central banks that met last week that shifted to a more optimistic outlook.

Technical Analysis

Considering the light economic calendar in the session ahead, EUR/USD may be contained within a tight range over the near-term.

There is notable resistance in play from the 200-week moving average and this stands to keep rallies short-lived on approaches to the 1.1330-1.1350 area.

To the downside, support for the session is seen at 1.1236.

US equity indices are under pressure in pre-market trading which is underpinning the dollar. However, if buyers step in after the open, it could cause the dollar to pare back some of its early day gains.

Bottom Line

• EUR/USD is seen edging lower from major resistance and is holding within a broader range that has been playing out for most of the month.
• PMI data from the US suggests the contraction in GDP growth might not be as severe as previously expected.

For a look at all of today’s economic events, check out our economic calendar.