EUR/USD Daily Forecast – Six-Day Bullish Rally Ends as Euro Returns to Important SupportAfter surging just short of 5% from last week’s low, EUR/USD turned lower yesterday to end a six-day upward streak as the dollar broadly recovered.
EUR/USD turned sharply lower yesterday which could be the first step in a trend reversal after a nearly 5% gain from last week’s low.
The pair was weighed by a strong dollar as the greenback is seen broadly recovering against the major currencies after a notable fall last week.
Home sales in the United States were reported to increase by 2.4% yesterday, coming in ahead of the analyst estimate for a decline of 1.8%.
However, since the data covers sales in February, it’s relevance is significantly reduced considered that the virus outbreak escalated towards the end of the month. Investors will tend to focus on data that reflects how the economy did in March and continue trying to assess how the economy is performing in light of the Coronavirus.
In this context, today’s euro Consumer Price Index figures will tend to have an impact on the exchange rate as it reflects data in March. Coming into the month-end, data releases moving forward may have an unusually large impact on the exchange rate and can deviate significantly from the analyst estimate as the Coronavirus is expected to have influenced the figures. This was seen last week with the US jobless claims report.
The developments in EUR/USD in the early week appear significant and could be signaling a bearish reversal.
The pair posted a bearish engulfing candle yesterday which supports the case for a reversal. In addition to that, EUR/USD has also failed to hold above the 200-day moving average which is otherwise an important and respected indicator.
Further, the pair is probing support at the psychological 1.1000 handle in the early day with what appears to be a general lack of strong buying pressure.
If EUR/USD falls through the 1.1000 support, the next area of downside interest falls at 1.0923. But more importantly, it could be signaling that the prior bullish trend has ended.
In the event of a recovery, the 200-day moving average offers some upside resistance with further resistance seen at 1.1074.
- Reactions to economic data could be volatile moving forward as the reporting period for many reports will include the timeframe in which the Coronavirus threat escalated.
- EUR/USD might be in the early stages of a reversal after a nearly 5% gain from last week’s low.