EUR/USD Daily Forecast – Range Conditions Remain Ahead of US CPI Data

If there is one major takeaway from EUR/USD over the past few weeks it’s that volatility has slowed in a significant manner.

The currency pair had shown weekly fluctuations of nearly 4% in March but volatility peaked at the same time the stock markets made a bottom later that month. Since then, average daily fluctuations have decreased noticeably.

This has likely frustrated EUR/USD bears as the pair has traded sideways near major technical support for six straight weeks at this point.

The decline in volatility implies that a catalyst might be needed if the currency pair were to break lower from here.

The latest consumer price index figures will be released from the US later today which could lead to a volatile reaction in the exchange rate. However, market participants appear to be well aware of the deterioration in the US economy as a result of the Coronavirus.

This has led to muted reactions to incoming data, despite most of the recent economic reports reflecting figures are that several standard deviations worse than the otherwise norm.

Today’s CPI report will be impacted not only by the Coronavirus but also by the drop in oil prices. Analysts are forecasting the index to have declined 0.7% in April and expect a drop of 0.2% in core CPI which excludes volatile items such as food and energy.

Technical Analysis

Buyers have been holding the exchange rate higher on dips towards the 1.0800 level and the range in EUR/USD appears to be narrowing.

The immediate range shows 1.0800 as support to the downside while 1.0850 has acted as a barrier since late last week.

A horizontal level at 1.0778 is seen as critical support as it held the pair higher on multiple attempts since February. The only exception was in March when the pair briefly dropped below it to momentarily trade at fresh multi-year lows.

Bottom Line

• The range in EUR/USD is narrowing as volatility continues to drop off after the surge in March.
• US CPI figures will be released later today. A volatile reaction seems unlikely considering the recent trend in fluctuations following significant economic data.