EUR/USD Daily Forecast – Euro Holds Steady

It’s been a quiet start to the day for the markets. EUR/USD trades unchanged, equities are under slight pressure, while precious metals are seeing the most action.

The price of gold extended higher in Asian trading above the $1800 level for the first time since 2011. The yellow metal is set to post a third straight day of gains and is up over 24% from the low posted in March.

EUR/USD has had a strong correlation with the equity markets as of late and a slowing of volatility in stocks has impacted the pair.

The S&P 500 briefly pierced to highs not seen since early June this week but has since pared gains with SPY posting a daily loss just over 1% yesterday.

The session ahead is likely to be quiet considering the general lack of events on the economic calendar and lower than usual volatility in other markets.

Yesterday, the European Commission made a notable downward revision to their GDP growth targets, citing a slower than expected easing of lockdown restrictions as the driver. EUR/USD initially reacted with a move lower but the impact on the exchange rate was not sustained.

Technical Analysis

The markets are operating in a correlated fashion with risk sentiment as the main driver for both equities and currencies.

In the early day, commodity pairs, which have a higher sensitivity to risk than other currencies, are the weakest among the majors.

EUR/USD has been contained within a range since June and volatility appears to be slowing even further, creating a secondary small range. This smaller range in the currency pair is defined by resistance at 1.1340 while support at 1.1212 is likely to draw buyers over the near-term.

Bottom Line

• Considering the light economic calendar, it may take a market-moving headline to get EUR/USD to break from its range.
• The currency pair has a strong correlation with risk sentiment at the moment. The S&P 500 is consolidating sideways after an early week rally to highs not seen since June 11. This further builds towards the case for low volatility in the session ahead.

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