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EUR/USD Daily Forecast – Euro Declines for Five Straight Sessions

Dollar Regains Critical Resistance Level

EUR/USD has been under pressure for a week straight and the dollar has gained with the trade-weighted index (DXY) climbing above resistance.

DXY rallied above a horizontal level at 98.25 yesterday and managed to close above it on a daily basis. This is the same level that held the exchange rate lower in April and May. The index is not too far from a two-year high, similar to EUR/USD, which last traded about 50 pips above this year’s low.

The decline in EUR/USD is not entirely dollar-driven, however, as the single currency has been under pressure against all of its major counterparts since last week. The most notable drop is in EUR/GBP as the pair posted a bearish engulfing candle on a weekly chart to end a 14-week winning streak.

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The markets will switch focus to the Federal Reserve as the central bank is scheduled to release minutes from their July meeting on Wednesday. The economic calendar for today is quite light. The only release pertaining to EUR/USD was PPI figures from Germany which came in a tick higher than expectations.

Technical Analysis

In yesterday’s forecast, the levels that stood out were 1.1075 to the downside and 1.1118 to the upside. The former level held while sellers stepped in slightly ahead of the latter to cap a recovery attempt. This type of price action points to weakness, especially as the pair is once again testing the support level today.

At the same time, I think it is important to consider how far the pair has fallen and whether it will break to fresh yearly lows ahead of the Fed meeting minutes tomorrow. I don’t think it makes sense chasing the pair lower at this stage for this reason.

EURUSD 4-Hour Chart
EURUSD 4-Hour Chart

In the session ahead, I see 1.1118 continuing to offer resistance on rallies. It will take a move above the level to change the near-term directional bias.

A break below 1.1075 exposes the yearly lows of 1.1027. If we somehow manage to get below 1.1027 today, I would expect some stops might be triggered. However, the pair might struggle to break that level on a sustained basis without a clear catalyst in place.

Bottom Line

  • The economic calendar is light ahead of the Fed meeting minutes release on Wednesday.

  • Support at 1.1075 is being tested, a break opens up a move to yearly lows at 1.1027. Upside resistance is found at 1.1118.

This article was originally posted on FX Empire

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