EUR/USD Daily Forecast – Resistance Area Gets Tested Ahead of ECB Decision
EUR/USD is trading near it’s weekly high and faces a confluence of resistance ahead of today’s ECB decision.
The pair has been boosted by a weaker dollar as the trade-weighted index (DXY) has posted four-straight daily declines.
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The Federal Reserve left rates on hold yesterday, as expected, and emphasized the need for further fiscal support to help the economy survive the Coronavirus. Fed Chair Powell reaffirmed the Fed will act as necessary and is not in a rush to raise rates after lowering them close to zero last month.
Economic data from the euro area was generally positive ahead of today’s ECB decision which stands to impact the outcome of the meeting. The unemployment rate rose marginally from 7.3% to 7.4% in March when virus containment measures were widely introduced. Analysts had been looking for a sharper rise in unemployment to 7.7%.
Similarly, inflation has held up with a flash estimate showing annual inflation at 0.4% in April, down from 0.7%. A bulk of the decline is attributed to a sharp drop in energy which suggests that the virus has not had all that great of an impact.
Growth in the euro area, however, did see a hit with the flash estimate for first-quarter GDP showing a decline of 3.8%. The figure was a ticker higher from the analyst estimate for a decline of 3.7%. The US reported yesterday a fall of 4.8% in GDP during the first quarter.
Technical Analysis
EUR/USD was last seen facing resistance from the 61.8% Fibonacci retracement as measured from the high posted in the middle of the month to the low for April.
Further, the 200 moving average on a 4-hour chart is in play to create a confluence.
The currency pair has not been able to cross above the 1.0900 area since it fell below it near the middle of the month. A bullish push higher is likely to trigger some stops and catch some bears off guard.
Support for the session ahead is found at 1.0830.
Bottom Line
- Euro area data has been generally positive ahead of today’s ECB meeting.
- EUR/USD faces a resistance confluence near the 1.0900 level.