EUR/USD Daily Forecast – Euro Set to Close Week with Small Gain

EUR/USD rallied in the early week but has since given back a bulk of the gains. Nevertheless, the pair is on pace to close the week out with a small advance to snap a two-week losing streak.

The markets have been somewhat mixed as of late. A resurgence in Coronavirus cases has weighed on risk sentiment, but at the same time, easing of lockdown restrictions in several parts of the world have led to optimism for the global economy.

ECB President Christine Lagarde remarked earlier today that the worst is probably behind us, referencing the Coronavirus. But cautioned that there could be a severe second wave.

The weekly unemployment claims report from the US yesterday showed a larger number of people filing for unemployment claims compared to the analyst estimate. However, the recent trend in this data series suggests the labor market is continuing to improve from the peak seen at the start of the quarter.

Trade tension between the US and Europe have escalated this week. Reports earlier in the week indicated that the US intends to introduce tariffs on certain imports from European countries.

The greater impact may come from a digital tax that some European countries plan to create. The tax is intended to generate revenues from companies that have a digital presence such as Google and Facebook. This could adversely affect the United States with its tech-heavy economy.

Technical Analysis

EUR/USD has been confined to a range since the start of the month. To the upside, the 200-week moving average, currently at 1.1331, has proven to be a major hurdle. Buyers have stepped in to hold the pair above notable support at 1.1132 thus far.

The range is likely to continue to hold over the near-term, and especially in the session ahead considering the lack of scheduled market-moving economic data.

EUR/USD shows slight upward momentum in the early day and could extend on this momentum in the session ahead as long as it holds above 1.1200. Resistance for the session ahead is found at 1.1268.

Bottom Line

• The markets are divided between improving economic data and a rise in Coronavirus cases which has led to some inconsistency in risk sentiment this week.
• Trade tariffs and digital taxation talks are still at early stages but could escalate and become a major factor determining the direction for EUR/USD.

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