EUR/USD Forecast: Euro remains fragile as focus shifts to ECB
- EUR/USD stays below 1.0900 after posting losses for the second consecutive day on Tuesday.
- PMI surveys from Germany, the Eurozone and the US will be featured in the economic calendar.
- Investors could refrain from taking large positions ahead of the ECB policy announcements.
EUR/USD turned south and touched its lowest level since mid-December at 1.0820 during the American trading hours on Tuesday. Although the pair managed to recover above 1.0850 early Wednesday, the technical outlook is yet to point to a build-up of bullish momentum.
Euro price this week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.15% | -0.08% | 0.14% | 0.16% | -0.25% | 0.07% | -0.08% | |
| EUR | -0.15% | -0.24% | -0.01% | 0.00% | -0.41% | -0.09% | -0.23% | |
| GBP | 0.09% | 0.23% | 0.21% | 0.25% | -0.16% | 0.16% | 0.01% | |
| CAD | -0.14% | 0.02% | -0.22% | 0.03% | -0.38% | -0.06% | -0.21% | |
| AUD | -0.16% | -0.01% | -0.25% | -0.01% | -0.45% | -0.09% | -0.23% | |
| JPY | 0.24% | 0.39% | 0.20% | 0.38% | 0.40% | 0.33% | 0.16% | |
| NZD | -0.08% | 0.06% | -0.18% | 0.04% | 0.09% | -0.34% | -0.15% | |
| CHF | 0.08% | 0.22% | -0.01% | 0.21% | 0.23% | -0.18% | 0.14% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
The risk-averse market atmosphere helped the US Dollar (USD) stay resilient against its rivals on Tuesday, despite the bearish action seen in the early European morning. US stock index futures trade in positive territory early Wednesday and make it difficult for the USD to gather strength.
Preliminary January Manufacturing and Services PMI surveys from Germany, the Eurozone and the US will be featured in the economic calendar on Wednesday. The private sector's economic activity both in Germany and the Euro area is forecast to show a contraction in early January. In case PMI surveys highlight the relatively healthier state the US economy is in, EUR/USD could have a hard time gaining traction. However, an improving risk mood could cap the USD's upside and help the pair limit its losses.
Nevertheless, investors are likely to refrain from taking large positions ahead of the European Central Bank's (ECB) monetary policy announcements on Thursday. Moreover, the US Bureau of Economic Analysis will release its first estimate of the fourth-quarter Gross Domestic Product growth as well.
EUR/USD Technical Analysis
EUR/USD corrected higher early Wednesday but is yet to climb above the 20-period Simple Moving Average (SMA) on the 4-hour chart. Additionally, the Relative Strength Index (RSI) indicator stays below 50, suggesting that the pair is struggling to gather bullish momentum.
On the upside, 1.0900 (psychological level) aligns as first resistance before 1.0930 (100-period SMA, 200-period SMA) and 1.0960 (Fibonacci 23.6% retracement of the latest uptrend).
Interim support seems to have formed at 1.0830 (static level) before 1.0800 (psychological level) and 1.0780 (Fibonacci 50% retracement).
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
