EUR/USD Daily Forecast – Test Of Support At 1.2040

EUR/USD Video 03.02.21.

U.S. Dollar Tries To Gain More Ground Against Euro

EUR/USD is currently trying to settle below the support at 1.2040 while the U.S. dollar is losing some ground against a broad basket of currencies.

The U.S. Dollar Index is currently testing the nearest support level at 91.10. If the U.S. Dollar Index manages to settle below this level, it will move towards the next support at the 50 EMA at 90.80 which will be bullish for EUR/USD.

Today, foreign exchange market traders will focus on economic data from the EU. Analysts forecast that Euro Area Services PMI declined from 46.4 in December to 45.0 in January due to the negative impact of virus containment measures.

Euro Area Inflation Rate is projected to grow by 0.5% year-over-year in January while Core Inflation Rate is expected to increase by 0.9%. Prices remain under pressure due to moderate consumer activity and slow economic recovery in the fourth quarter..

Yesterday, EU reported that Euro Area fourth-quarter GDP declined by 0.7% on a quarter-over-quarter basis. The relative strength of the U.S. economic recovery compared to the economic recovery in the Euro Area has put pressure on EUR/USD in recent weeks. If today’s economic reports from EU are weak, euro may find itself under additional pressure.

Technical Analysis

EUR/USD is currently testing the nearest support level at 1.2040. If this test is successful, EUR/USD will move towards the next support level at 1.2000. Yesterday, EUR/USD made an attempt to get to the test of this level but received strong support near 1.2010.

If EUR/USD manages to settle below 1.2000, it will move towards the next support at 1.1965. A successful test of this level will open the way to the test of the support at 1.1925.

On the upside, EUR/USD needs to settle above 1.2040 in order to have a chance to develop upside momentum in the near term. The next resistance level is located at 1.2060. If EUR/USD gets above this level, it will head towards the next resistance at 1.2080. A move above 1.2080 will open the way to the test of the resistance which is located at the 50 EMA at 1.2110.

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