EUR/USD Daily Forecast – Test Of Support At 1.2000

EUR/USD Video 04.02.21.

Euro Remains Under Pressure

EUR/USD is currently trying to settle below the support at 1.2000 while the U.S. dollar continues to gain ground against a broad basket of currencies.

The U.S. Dollar Index has recently managed to get above the resistance at 91.30 and is moving towards the next resistance level at 91.50. If the U.S. Dollar Index settles above 91.50, it will head towards the next resistance level at 91.75 which will be bearish for EUR/USD.

Yesterday, EU reported that Euro Area Services PMI declined from 46.4 in December to 45.4 in January. The report was a bit better than the analyst consensus of 45 but Euro Area Services PMI remained well below the U.S. Services PMI which increased from 54.8 to 58.3. The Euro Area Services PMI report highlighted the current weakness of the European economy which continues to put pressure on the euro.

Interestingly, inflation in the Euro Area was significantly stronger than expected. In January, Euro Area Inflation Rate increased by 0.9% year-over-year while Core Inflation Rate grew by 1.4%.

Today, foreign exchange market traders will focus on the latest Retail Sales data from EU. Analysts expect that Euro Area Retail Sales increased by 1.6% month-over-month in December. On a year-over-year basis, Euro Area Retail Sales are projected to grow by 0.3%. If the report is weaker than expected, euro will likely find itself under additional pressure.

Technical Analysis

EUR/USD settled below the support at 1.2040 and is currently trying to settle below the next support level at 1.2000. If this attempt is successful, EUR/USD will gain additional downside momentum and head towards the next support at 1.1965.

In case EUR/USD gets below this level, it will head towards the support at 1.1925. A successful test of this level will open the way to the test of the next support level at 1.1900.

On the upside, the previous support at 1.2040 will likely serve as the first resistance level for EUR/USD. A move above this level will push EUR/USD towards the resistance at 1.2060. If EUR/USD settles above this level, it will head towards the next resistance at 1.2080.

For a look at all of today’s economic events, check out our economic calendar.