EUR/USD Daily Forecast – Euro Recovery Meets Trendline Resistance

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

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.
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