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EUR/USD Daily Forecast – Euro Recovery Meets Trendline Resistance

By:
Jignesh Davda
Published: Jan 13, 2020, 09:46 UTC

EUR/USD attempted to extend higher in early trading on Monday but was faced with strong selling after testing resistance from a declining trendline.

EUR/USD

Will the Dollar Take the Spotlight Again this Week?

The US dollar dominated the major currencies last week and the trade-weighted index (DXY) made a notable technical development.

DXY had been trading in a range from the last week of December until the middle of last week but broke higher from the range to signal a recovery. Friday’s US jobs report caused a small pullback but the index still managed to close the week with a half a percent gain.

The NFP report from Friday revealed a smaller than expected job gain in December and the average hourly earnings component fell short as well. Despite this, the unemployment rate held at a multi-decade low of 3.5%.

The bulk of the majors are trading relatively flat on the day with the exception of the British pound. GBP/USD is down half a percent at the time of writing and has crossed below the psychological 1.3000 handle.

Retail sales figures out of Italy were softer than expected, showing a decline of 0.2% in December versus the analyst estimate of a 0.1% gain. Further weakening the report was a downward revision for October to show a decline of 0.3% versus the originally reported fall of 0.2%.

The economic calendar does not contain any market-moving data releases pertaining to EUR/USD for the rest of the day.

Technical Analysis

EUR/USD recovered higher following Friday’s US jobs report and attempted to continue the recovery in the early day. However, a confluence of resistance in the pair has resulted in some selling pressure.

EURUSD Hourly Chart

This resistance comes from a horizontal level at 1.1129 which intersects with a declining trendline originating from the late December high.

This could mark the end of the jobs report induced recovery for EUR/USD although further confirmation can be had on a drop below the weekly open. This falls roughly around 1.1113.

The downside, major support for the pair is seen at 1.1078. This marks a level that has been respected as both support and resistance on a daily chart. A rising trendline from the October low falls near it to create a confluence.

Bottom Line

  • EUR/USD might be resuming lower with strong selling seen from a resistance confluence.
  • The next downside target for the pair comes in at 1.1078.

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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