EUR/USD Daily Forecast – Euro Rallies to 22-Month High As Dollar Continues to Tumble

Market trends remain intact with equities and precious metals rallying while the dollar continues to remain under pressure.

Shortly after the European open, gold prices are seen trading at record highs, the S&P 500 has advanced nearly half a percent in pre-market trading, and the dollar index (DXY) is at a fresh 10-month low.

The single currency has benefited the most from the weaker dollar in July thus far compared to other major currencies. It has gained nearly 4% against the greenback.

Unlike last week, the week ahead has several economic events that stand to move the markets. The highlight will likely be Wednesday’s Fed meeting and press conference.

Last week, PMI figures from Europe showed both the manufacturing and services sectors moving into expansion, recovering from the sharp contraction in April. The same data for the US showed a similar trend although figures were short of the analyst estimate.

The jobless claims report last week rose for the first time since the April release. In early April, jobless claims hit a high of 6.6 million and proceeded to decline for 15 straight weeks.

Technical Analysis

EUR/USD sliced through fairly notable resistance near 1.1600 despite having entered overbought territory on a daily chart.

The pair appears to be in a technical breakout after taking out the March highs last week. The upward momentum and last week’s candle point to strength. The only thing going against the pair is that it is overbought.

The next level to watch to the upside comes in at 1.1735. This is a level that was relevant on a weekly chart back in 2017 and 2018.

To the downside, 1.1605 offers strong support. If buyers fail to defend it on a dip, it might be signaling that a more meaningful correction is taking place.

The correlation with the equity markets and EUR/USD remains intact. Last week, SPY posted a candlestick that suggests exhaustion and ended a three-consecutive week rally.

Bottom Line

• EUR/USD traded at fresh 22-month highs earlier today
• The Fed meeting this week will be widely watched and stands to have an impact on the exchange rate.

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