EUR/USD Daily Forecast – Euro Looks to End Year on Strong Note

EUR/USD Retraces to Mid-Point of 2019 Range

The price action in EUR/USD, in hindsight, followed a simple pattern in 2019. The pair declined from the start of the year until hitting a bottom at the beginning of the fourth quarter. It has since recovered to erase half of the decline. The exchange rate is set to post a yearly loss of about 2%.

From high to low, the range in the pair this year has been about 700 pips or 6%. Among the major currencies, the single currency was the weakest. The euro was one of only two major currencies that did not gain against the dollar. The other is the Australian dollar which is down a fraction of a percent against the greenback for the year.

The recovery that started at the end of the fourth quarter has some momentum behind it and there is some potential for further upside. Over the near-term, however, EUR/USD is facing resistance at 1.1217. This is a level that held the pair higher in the fourth quarter last year, similar to what the 1.0900 handle did for the pair this year.

There are quite a few data releases scheduled for Thursday and so there is some potential for volatility later this week. The session ahead might accompany unpredictable volatility as the markets will tend to be thin during the holidays.

Technical Analysis

The momentum remains to the upside in the early day for EUR/USD although notable resistance is in play. This comes from a horizontal level at 1.1217 that has been well-respected on a daily chart.

If the pair manages to scale above the level, further resistance is seen at 1.1250. To the downside, support for the pair is seen at 1.1173 for the session ahead. This was prior resistance that held the pair lower from the middle of October until the break higher earlier this week.

With most traders in holiday mode, volatility in the day ahead is unpredictable. Typically, volatility tends to slow on the last day of the year. Although there have been some years where traders have taken advantage of the low liquidity to create radical price moves.

Bottom Line

• EUR/USD is showing upward momentum in the early day but is faced with resistance at 1.1217.
• Volatility in the session ahead can be unpredictable. Typically, volatility tends to slow significantly on the last day of the year.