EUR/USD Daily Forecast – Euro Gains But Holds Within Broader Range

EUR/USD was up about a third of a percent in early European trading on Monday, boosted by a weaker dollar.

The pair posted a loss last week to snap an eight consecutive week rally. The upward momentum is slowing ahead of the 1.2000 handle which is seen as a major upside hurdle.

The exchange rate has mostly moved sideways over the past few weeks, and this may continue considering the light economic calendar in the week ahead. GDP data will be released from Germany tomorrow and from the US later in the week. But as these figures are revised from earlier estimates, they are not likely to move the markets.

Equities are seeing a firm bid in the early day with the S&P 500 set to open just over half a percent higher. In currencies, however, the risk-on tone is lacking with little movements in pairs like USD/JPY and NZD/USD, which usually correlate well with stocks.

COVID-19 cases in the US have moved slightly higher since late last week but the broader trend remains to the downside after the number of daily cases peaked in late July.

Technical Analysis

EURUSD 4-Hour Chart

The dollar could be attempting to turn after a sharp fall last month and the price action in EUR/USD so far appears to support the view.

EUR/USD typically goes through a period of consolidation prior to reversing, rather than an abrupt turn.

The current range shows support around 1.1735 while resistance is found at 1.1947. On the shorter time frames, there is fairly strong resistance in around 1.1850.

Because of the earlier trend, the pair may continue to see a firm bid on near-term dips. However, sellers have been present on moves towards the 1.1900 area and therefore it may take a breach above the level to entice buyers.

Bottom line

  • EUR/USD has moved sideways for most of the month. This price behavior could continue in the week ahead considering the light economic calendar.
  • It may take a sustained break above 1.1900 to confirm that the prior uptrend remains intact. On the other hand, a drop below 1.1735 may signal that a broader reversal is taking place.

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