EUR/USD Daily Forecast – Markets Await Powell’s Speech and Jobless Numbers

After an initial push higher on Tuesday, EUR/USD has become somewhat directionless, awaiting the next catalyst.

The equity markets rallied once again yesterday although the impact on the dollar has lessened as EUR/USD managed to hold above support at 1.0830.

The inverse correlation between the dollar and equity markets became well known after the dollar surged while equity markets fell sharply last month when investors tried to move to a cash position. This same correlation may not be as strong with risk appetite returning as the previous scenario involved a fair bit of urgency.

Later in the session today, the US will report its latest weekly jobless claims. This report has become more important over the past few weeks as claims have risen rapidly over the past two weeks as a result of the Coronavirus.

A record 6.6 million new claims were filed in the last reporting period. To put some perspective on the figure, the report typically shows the number of new claims in the low 200 thousand. This had been the case for several years now.

Aside from the unemployment data, Fed Chair Powell will be speaking at 14:00 GMT and providing an update on how the US economy is managing its battle against the Coronavirus. A virtual Q&A is expected to follow.

Technical Analysis

Between Powell’s speech and the jobless numbers, a range breakout appears likely for EUR/USD in the session ahead.

A break below 1.0831 in the currency pair could see the exchange rate extending losses back towards recent lows near 1.0788.

The near-term technical outlook points to upside potential however, considering the bullish candle from Tuesday. A break above 1.0927 shows further resistance for the pair at 1.0970 for the session ahead.

The US dollar index (DXY) is continuing to hold above the psychological 100.00 level in the early week but has generally seen a lack of buyers when testing this area.

How the index reacts around the 100.00 price point may set the tone over the next couple of trading sessions.

Bottom Line

• EUR/USD has fallen into a sideways range after a sharp recovery on Tuesday.
• A range breakout appears likely in the session ahead as Powell is scheduled to speak and the weekly jobless claims report will be released.