EUR/USD Daily Forecast – Euro Holds Steady Despite a Boost in Risk Sentiment

EUR/USD is on pace to erase last week’s loss if it manages to close the week near current levels.

The dollar has diverged somewhat from its inverse correlation with the equity markets. The Coronavirus escalation last month saw investors fleeing to the dollar as they exited from the stock market.

Although the inverse was initially seen last week, the greenback has gained alongside the equity markets this week.

Annual inflation in Europe declined for a second consecutive reading with the latest report from Eurostat showing a rise of 0.7% in prices of goods and services in the year to March. On a month over month basis, CPI rose half a percent.

A further drop in annual inflation from here would have the measure at a four-year low.

Jobless claims out of the US were roughly in line with analyst expectations as 5.2 million people filed for unemployment benefits for the first time last week.

The last four unemployment claims reports combined reflect that nearly 22 million jobs have been lost in the United States.

Technical Analysis

With no relevant economic data scheduled for release in the North American session, EUR/USD stands to trade within a range and a decline in volatility appears likely.

Downside support at 1.0830 was briefly breached but there has not been any follow-through. This could be a floor for the session ahead.

Rallies in the session ahead are likely to be met with sellers considering the bearish price action throughout the week. The first hurdle to the upside is found at 1.0859. The same level previously held the pair higher earlier in the week. Major resistance is seen at 1.0905.

If sellers manage to drive the pair below support at 1.0831, the next area of interest falls at 1.0783 as the level offered support earlier this month and held the exchange rate higher in February.

Bottom Line

• EUR/USD appears to be diverging from its prior correlation with the equity markets
• A range may develop with volatility expected to slow in the session ahead due to a lack of economic data.