EUR/USD Daily Forecast – Euro Recovers, Resistance in Play

EUR/USD pushed higher in the early day but is seen battling a confluence of resistance.
Jignesh Davda

EUR/USD Pushes Higher as the Dollar Retreats

A bit of broad-based dollar weakness in the markets has triggered a recovery rally in EUR/USD.

The US Dollar index (DXY) was seen moving lower for a second consecutive session following a sharp rise on Tuesday after US retail sales were reported ahead of expectations.

DXY is trading near some important resistance. Specifically, a horizontal level at 97.65 held the index lower on several attempts in 2018. It also held sellers in February this year and around the middle of June.

With the Fed meeting later this month, and rising expectations of aggressive easing, a catalyst does not appear to be in place for a break higher. At the same time, I think it is important to be mindful of the bullish engulfing candle in DXY from Tuesday’s retail sales beat.

Technical Analysis

EUR/USD is seen testing a significant resistance confluence.

On an hourly chart, the pair is testing a horizontal level at 1.1237. There is also the upper bound of a trend channel which has encompassed price action in the week thus far.

On a daily chart, the 50 and 100-day moving averages are converging towards 1.1245, essentially the high for the day thus far.

Similar to DXY, EUR/USD posted a large red candle on Thursday. So far the two-day recovery has not wiped out this big down day and the upward momentum has been soft. This leads me to believe the pair may struggle to continue gaining from here.

EURUSD Hourly Chart

There is not much market-moving data for the rest of the week, so unless there is headline news that stands to move the markets, we may see volatility drop from here.

To the downside, The 1.1200 handle has been holding the pair higher. This remains key support over the near-term.

Despite the broad-based dollar weakness today, EUR/USD is under performing a bit. The single currency is trading virtually flat against the greenback in the early day. The British pound is the strongest major currency as a UK retail sales beat has boosted Sterling.

Bottom Line

  • EUR/USD is testing a major resistance confluence
  • With a relatively light economic calendar for the remainder of the week, a drop in volatility appears likely.
  • Support for the pair is found at 1.1200
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