EUR/USD Daily Forecast – Euro Weakness ContinuesEUR/USD posted a sixth consecutive day of losses on Monday, something it hasn’t done in over five months. In the process, the pair broke through notable support and is now at risk of falling to fresh multi-year lows.
The euro has started the week out on a negative note, declining against all of the major currencies. A boost in risk sentiment is weighing on the exchange rate as Coronavirus fears have subsided and popular US equity indices rallied to record highs.
The price action over the last week or so provides a signal of confirmation that EUR/USD has resumed within the broader downtrend after recovering in the fourth quarter of last year. This will tend to entice investors interested in carry trades and stands to keep the pair well offered on recovery rallies.
The economic calendar has been rather light in the week thus far. Later today, ECB President Lagarde is scheduled to speak and Fed Chair Powell will testify before congress.
Powell’s speech is more likely to cause market volatility out of the two. However, prior communication has level set the market that the Fed will stay on hold for now, and if he holds to that view, the market reaction could be muted. Lagarde will be delivering opening remarks at an event in France, typically, these types of speeches do not move the markets.
EUR/USD has started February out on a weak note. The six consecutive day decline is quite unusual for a pair that is often quick to fall into a range.
Had it not been for the range type price action the pair has displayed over the last year or so, the recent decline might be signaling the start of a technical breakdown. But EUR/USD has failed to sustain within a trend for nearly two years at this point. For this reason, the risk to reward does not appear to favor short position from current levels.
On a 4-hour chart, EUR/USD entered oversold conditions after falling below 1.10 late last week. On a daily chart, technical indicators fell into oversold territory following yesterday’s decline.
The next area of support for the pair comes in at 1.0897 which marks the lowest daily close last year. To the upside, near-term resistance is found at 1.0940.
- EUR/USD extended lower on Monday and has posted losses every day in February thus far.
- Prior price behavior combined with oversold conditions signal potential for a recovery.