EUR/USD Daily Forecast – Euro Recovers as the Dollar Index Battles Resistance

EUR/USD was on track to post a loss every day in the week thus far, however, buyers have stepped in after a brief dip to a fresh monthly low.

The turn in EUR/USD in the early day coincided with a test of resistance in the trade-weighted US dollar index (DXY). The index was seen testing resistance from highs posted earlier this month. While DXY appears poised to break higher, we may see some near-term selling from this resistance area which stands to underpin the EUR/USD exchange rate.

US durable goods orders are scheduled for release later in the day and the report could accompany a volatile reaction among the dollar pairs. Analysts are expecting a significant 12% decline in orders for March.

Earlier today, the German business climate index was reported to fall to a record low as virus fears dominate the German economy. The index came in at 74.3 versus the analyst forecast of 79.8.

Technical Analysis

EUR/USD broke to a fresh low for the month yesterday although today’s early day buying suggests a low for the week might be in already.

Today’s durable goods orders report is more likely to accompany a volatile reaction if there is a significant deviation from the analyst expectation.

A further decline in EUR/USD would mean a rise above resistance in DXY and a catalyst will likely be needed for that to happen.

For the session ahead, resistance is found at 1.0778 as the level served to hold the currency pair higher earlier in the month. Beyond that, further resistance is seen at 1.0800.

The last candle printed on a 4-hour chart signals strong buying and for that reason, dips in the session are likely to be bought. In the event the pair breaks to a fresh low for the week, the next area of downside interest falls at 1.0708.

Bottom Line

• After facing steady selling pressure all week, EUR/USD is seeing some reprieve as the rally in the dollar index is met with sellers from prior highs.
• Durable goods orders data will be released in the US session and a volatile reaction might be seen if there is a significant deviation from the analyst forecast.