EUR/USD Daily Forecast – Euro Remains Confined to a Range

After a sharp drop below 1.1225 support on the back of last week’s ECB meeting, EUR/USD has formed a range with buyers defending the 200-day moving average on the downside.

The US dollar rallied sharply last week against the major currencies to set a bullish tone. The trade-weighted dollar index (DXY) has erased the roughly 3.5% loss for the month and shows a small gain. At this stage, the index needs to rally another one and a quarter percent to trade at fresh multi-year highs.

Germany’s ZEW will release its economic sentiment figures later today. Out of the United States, retail sales figures for February will be reported. The German report is expected to decline notably as surveyed German investors and analysts are likely to change their stance following the Coronavirus escalation.

The retail sales report from the US reflects data up until the end of February. Considering that the virus scare escalated in late February to early March, the data is not likely to have much relevance. As such, a market reaction is not expected.

The markets are likely to continue focusing on actions being taken to stave off the effects of the virus. After the Fed’s emergency rate cut this week, the focus will tend to be on fiscal easing efforts both from the US and Europe.

Technical Analysis

EUR/USD declined sharply last week and there is sufficient evidence that the pair has turned. On a weekly chart, the 20-week moving average is holding the pair higher.

While the pair trades within a range, the bias remains to the downside over the near-term. It might take a rally above 1.1225 to change this view. So far, the level has capped a few rally attempts since the ECB meeting.

The 200-day moving average is in play and has been holding the exchange rate higher on a daily close basis since late last week. The combined moving average support between the weekly and daily chart points to a strong floor for the currency pair.

Nevertheless, a break lower would tend to target 1.1000 which was a well-respected level in the fourth quarter and in January.

Bottom Line

• EUR/USD is range-bound with buyers defending the 200-day moving average while sellers are holding the pair below 1.1225.
• The markets will continue to look to the governments for further policy action to help combat the virus.