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EUR/USD Daily Forecast – Euro Pops Above 1.1900 on a Broadly Weaker Dollar

By:
Jignesh Davda
Published: Aug 28, 2020, 09:48 UTC

EUR/USD made a sustained break higher in the Asian session and buying has continued in early European trading.

EUR/USD

In this article:

The US dollar has fallen notably against all of its major counterparts in early trading on Friday with the antipodean currencies gaining the most.

The EUR/USD pair has made a sustained break above resistance at 1.1844 which had previously capped rally attempts throughout the week.

Yesterday’s speech from Fed Chair Jerome Powell caused some volatility but did not trigger an immediate range breakout. As many had speculated, the Fed Chair signaled that policymakers are willing to let inflation run above the 2% target in the short-term to compensate for lengthy periods where inflation has run below targets.

However, the Fed will continue to focus on a longer run target of 2% and maintains it’s stance to aim for maximum employment, without specifically stating an unemployment rate target.

The bottom line is that the Fed won’t be raising rates anytime soon, which is not all that surprising considering that both monetary and fiscal policy are expected to remain accommodative for some time in light of the pandemic.

Technical Analysis

EURUSD 4-Hour Chart

The dollar is weaker today against all of its major counterparts, in line with the broader bearish trend that has been taken place since mid-March.

It could be argued that the dollar weakness seen today is a result of month-end flows rather than Powell. After all, EUR/USD briefly dipped to around 1.1760 during Powell’s speech, printing a fresh low for the week.

Nevertheless, the short-term trend in EUR/USD is clearly to the upside and buyers are likely to show interest in near-term dips.

The first level of support is seen at 1.1878. This same level acted as resistance in late July and early August, as seen on a 4-hour chart. In the event of a dip below the level, further support is found at 1.1844 which marks the upper bound of the range that took place for most of the week.

A potential upside target is seen at 1.1950. The same level held the pair lower around the middle of the month. Channel resistance is seen just above the level to create a bit of a confluence.

Bottom Line

  • The dollar had a mixed reaction to Powell’s speech yesterday but is showing renewed weakness today.
  • Month-end positioning and position squaring are likely to cause some volatility today and on Monday.

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

About the Author

Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.

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