EUR/USD Daily Forecast – Euro Edges Higher on a Broadly Weaker Dollar

The FX markets are driven by the greenback in the week thus far and the EUR/USD pair has edged slightly higher in early trading on Wednesday on the back of a slightly weaker dollar.

The US Dollar index (DXY) ran into a hurdle near the 100.50 level yesterday and has given back a bulk of the gain since then.

The economic calendar has been relatively light in the first half of the week and fluctuations in the currency pair have been less volatile as a result. However, that stands to change.

Last week’s US retail sales report was the start of a series of reports that will show how the economy is handling the aftermath of the initial Coronavirus shock. Up until now, a lot of the data releases covered periods ahead of March when the virus did not have as great of an impact on the economy.

Thursday’s release of purchasing manager’s survey data stands to be the highlight for the week as it covers a more recent period. Further, survey data is expected from both the US and the eurozone. We may see some trends set as a result of the report, but ahead of it, a range continuation appears likely.

Technical Analysis

Support at 1.0830 has done well to hold EUR/USD higher in the early week and there is some potential for a further recovery in the session ahead to test resistance from the recent range.

This range resistance is found near 1.0900 which held the pair lower on Monday.

At this point, a range break might not see follow-through unless there is some form of a catalyst behind the move. Tomorrow’s PMI data could offer such a catalyst.

The US Dollar index has been edging lower since the end of European trading yesterday and last traded close to the 100.00 level. A drop below it could accompany a quick move to 1.0900 in EUR/USD.

Bottom Line

• A weaker dollar in early trading on Wednesday is helping to lift EUR/USD higher after another test of 1.0830 support yesterday.
• Thursday’s PMI data will be important and a more meaningful move in EUR/USD is likely to happen after the data.