EUR/USD Daily Forecast – Euro Well Supported on Dips

200-Day Moving Average Target in Sight

EUR/USD seems poised to test the 200-day moving average although appears to be pausing at resistance near last month’s highs.

The currency pair dipped lower on Friday following the US jobs report to test a fairly notable area of support. The exchange rate then rallied firmly higher, reasserting the recent upward momentum.

EUR/USD bottomed out at the start of October and has gained just over 2.5% since.

Manufacturing data out of Europe today was mostly mixed, although did not have a major impact on the exchange rate. Most of the releases were roughly in line with expectations aside from the Spanish PMI which fell further into contractionary territory.

The manufacturing PMI for the entire euro area dipped slightly to hold near a seven-year low. Although analysts had been calling for some continued weakness.

Later in the session, the European Central Bank’s new President, Christine Lagarde, will give her first speech as head of the ECB. Unless her communication suggests anything different from what Draghi has been telling us, it is not likely to move the exchange rate much.

Technical Analysis

Friday’s dip in EUR/USD led to a test of important support. The pair challenged support from a horizontal level at 1.1129 but also retested a previously broken trendline. This declining trendline extends from the October high, and the recent break signals that the exchange rate remains in an uptrend.

For this reason, I think the pair will continue to march higher, and try and test the 200-day moving average. The last time the pair challenged this indicator was over four months ago.

The moving average currently falls just below the psychological 1.1200 handle. There is a horizontal resistance level at 1.1217 and I think this area will offer the pair it’s next rather significant hurdle.

Bottom Line

• EUR/USD saw selling pressure at the start of the session. However, the pair is holding firm near last month’s highs.
• The exchange rate appears poised to test the 200-day moving average. It currently falls a few pips below the psychological 1.1200 level which stands to offer near-term resistance.