EUR/USD Daily Forecast – Euro Set to End the Week on a Strong Note

Investors had more reasons to buy stocks yesterday as the Federal Reserve introduced $2.3 trillion worth of stimulus which included some unconventional measures such as lending to states and municipalities.

The flow of funds back into the stock markets, as well as the injection of liquidity by the Fed, has caused the dollar to move lower. The greenback is on pace to be the weakest performer among the major currencies in the week thus far.

Weakness in the US job market put further pressure on the dollar as yesterday’s jobless claims report revealed 6.6 new people filing for unemployment benefits last week.

This has been the third consecutive reading where claims have been several multiples higher than the average over the past few years. Ahead of the virus outbreak, the report would typically reflect around 200 thousand people claiming benefits each week, going back several years.

The session ahead is likely to see a decline in volatility as the US stock markets will be closed in observance of Good Friday. Inflation data will be released from the US although the impact may be muted. While inflation plays a critical role in monetary policy decisions, the Fed is currently focused on the virus outbreak and today’s report is not likely to alter their outlook.

Technical Analysis

The near-term trend in EUR/USD remains to the upside and the next potential area of interest falls at the psychological 1.1000 level.

Volatility is expected to decrease as a result of the holiday and any extreme moves in the session ahead are likely to be faded.

To the downside, support for the session ahead is found at 1.0900 which marks a support confluence. The confluence is created by a horizontal level as well as trendline support.

The US dollar index has fallen below 100.00 on a sustained basis and this could trigger more losses for the index. The inverse correlation with the dollar and equity markets remain strong although the downside in the session ahead may be limited as the US stock markets are closed today.

Bottom Line

• EUR/USD has recovered this week as a return of risk appetite has caused the dollar to decline against all of its major counterparts.
• The Fed has introduced an aggressive $2.3 trillion stimulus package which further boosted investor sentiment.
• US equity markets will be closed today in observance of Good Friday.