EUR/USD Daily Forecast – Euro Lingers Near Critical Support

EUR/USD eased lower at the European open but remains within a range after a sharp push lower over the last two week.

The pair is down nearly 7% from a high posted early in the month and has recently broken to lows not seen since 2017.

The exchange rate saw a brief reprieve around the ECB meeting earlier this month but investors continue to pile into the greenback and liquidating risky assets such as stocks which is putting relentless pressure on the pair.

The dollar index (DXY) is on the verge of a technical breakout at this stage. It is trading at the same resistance level that previously held it lower at the start of 2017. If it were to rally above it, technical traders would view it as a bullish sign which is likely to accelerate the upward momentum for the dollar.

This could translate to a swift break to three-year lows in EUR/USD with an expected follow-through, possibly towards parity.

A meeting between the G20 takes place today to discuss the impact of the Coronavirus outbreak. Headlines stemming from the meeting stand to move the exchange rate over the near-term.

On Tuesday, PMI data will be released from several countries within the euro area. This data reflects a survey of managers in the manufacturing and services industry. The markets tend to react to it as it gives a good gauge of sentiment towards the economy. Especially considering fears surrounding the Coronavirus have escalated notably since the start of the month and as this data tends to be forward-looking.

Technical Analysis

The focus for EUR/USD traders at this stage should be on the US dollar index which carries a strong inverse relationship with the currency pair.

DXY is currently hovering around the 103.00 level which is considered major resistance. If the index were to break above it, there is a good chance technical traders will start buying aggressively.

In such a scenario, EUR/USD stands to break to new lows and the next major area of interest falls at 1.0462. This area held the currency pair higher in 2015 and then once again in 2017.

Resistance over the near-term is seen at 1.0800. If the pair gets above the level, it might be signaling that a recovery is taking place. Support for the session ahead is found at 1.0663 which has held the pair higher since Thursday on a 4-hour chart.

Bottom Line

• A break below 1.0663 in EUR/USD is likely to match a technical breakout in the US dollar index which stands to accompany an acceleration in the bullish dollar trend.
• The G20 meeting takes place today, headlines stemming from it stand to move the exchange rate.