- EUR/USD ran aground after a one-month rally and may now consolidate its recent gains this week, but with potential buyers already lining up the decline.
- The single European currency may also find itself well supported when near and below the 1.08 support.
- At the beginning of this week's trading, the price of the euro currency pair fell against the dollar, EUR/USD, as a result of profit-taking sales, which I often referred to as the support level of 1.0909, before settling around the level of 1.0935 at the time of writing. Its gains last week extended to the resistance level at 1.1075.
In general, the single European currency - the euro - gave way to all of its counterparts in the G-20 basket on Monday, after it retreated from its one-year high around 1.1080 on Friday when an influential policymaker reminded the market that US interest rates may continue to rise this year. The burden of proof falls on the short supply of US data in the coming days, which have warned almost uniformly in recent weeks of a broad-based slowdown in the economy that could rule out any possibility of further US interest rate increases.
Commenting on the performance of the EUR/USD Brad Bechtel, FX Analyst at Jefferies writes that “It is still a good environment for EUR/USD, and it is trending nicely. We could drop to the 1.0750 area around the 50dma/100dma and there if the above US/DXY rate story plays out, but I would be a buyer there. I do not expect us to get these levels and I think we are holding 1.0850.”
All in all, there is little data on the calendar to influence the outlook for US interest rates this week ahead of Friday's S&P Global surveys of the manufacturing and service sectors on both sides of the Atlantic. Policymakers from the Federal Reserve and European Central Bank (ECB) will be speaking out.
Surveys containing April's "managers' views on economic conditions" were among the indicators cited on Friday that could potentially influence Fed Chair Christopher Waller's interest rate decision in May, making Friday's PMI surveys more likely than not. The most important events for the dollar. European Central Bank officials, European business surveys, and the final estimate of inflation by Eurostat last month are likely to capture the lion's share of the market's attention.
The ECB said in March that its next policy decisions would be decided by emerging data in the coming months, and since then business surveys have suggested a thaw in the eurozone economy with signs that inflation may be more steady than previously expected.
EUR/USD Technical Outlook
EUR/USD is trading above the ascending trend line, with its lowest level since late March. The pair looks ready to bounce back to this support level, which lines up with Fibonacci retracement levels. The price seems to be finding buyers already at 38.2% Fibonacci near the 1.1000 resistance and is likely to revisit the swing high at 1.1076. The biggest correction might reach a 50% Fibonacci retracement at 1.0956, or the 61.8% level closest to the trend line at 1.0928.
Ready to trade our daily Forex forecast? Here’s a list of some of the best Forex brokers to check out.