EUR/USD Daily Forecast – Euro Falls Into a Range Near Trendline Support

EUR/USD Rally Hindered by Dollar Strength

EUR/USD is struggling to continue higher as the dollar is rebounding after a sharp drop last week. Nevertheless, the single currency is showing a little bit of strength as it is outperforming all the other major currencies in the early week thus far.

The US dollar index (DXY) has moved higher this week after testing trendline support. This trendline is drawn connecting the January low with a low printed in June. DXY printed a bullish reversal candle on a daily chart on Friday which signals the potential for a further near-term recovery.

The economic calendar is light in the week ahead pertaining to EUR/USD which suggests the range-bound conditions seen in the currency pair might be here to stay.

Among the euro cross rates, EUR/GBP is seen advancing 1% in the early day. The pair is boosted by a weaker British pound after fears of a no-deal Brexit resurfaced. This came as UK Prime Minister Boris Johnson said he wants to implement a law that prevents a delay in the transition period.

As it stands, the UK is expected to officially leave the EU at the end of next month. A transition period will then take place until the end of the year so that a trade agreement can be negotiated with the EU.

Technical Analysis

EUR/USD rallies have been capped around the 1.1150 area while dips were met with buyers from 1.1129 support.

Further support for the exchange rate is seen slightly below 1.1129 support as a rising trendline comes into play. This trendline originates from the late November low.

A major hurdle for the pair has been 1.1179. This price point held the pair lower last week as well as in October. Considering the light economic calendar this week, it doesn’t seem likely that the pair will make another attempt at the level.

In the event EUR/USD falls below the rising trendline, further support is seen from a horizontal level at 1.10923.

Bottom Line

• EUR/USD is trading in a tight range in the absence of market-moving economic data.
• With notable overhead support, and the dollar bouncing, the pair might struggle to continue higher in the rally that started at the beginning of the month.