EUR/USD Forecast: Euro could test 1.0960 on a hawkish ECB surprise
|- EUR/USD fluctuates near 1.0900 after failing to clear this level on Wednesday.
- ECB is widely expected to leave key rates unchanged.
- Investors will also pay close attention to US GDP data.
EUR/USD gathered bullish momentum and advanced to the 1.0930 area on Wednesday. With the US Dollar (USD) staging a rebound later in the day, the pair erased a large portion of its daily gains and returned below 1.0900. Investors await the European Central Bank's (ECB) policy announcements and high-tier data releases from the US.
Although the Composite PMI from the Euro area showed that the business activity in the private sector continued to contract in early January, the Manufacturing PMI recovered unexpectedly and helped the Euro find demand. Moreover, the improving risk mood made it difficult for the USD to stay resilient against its rivals. Nevertheless, upbeat PMI readings from the US supported the USD and forced EUR/USD to turn south later in the American session.
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.06% | -0.18% | 0.63% | 0.21% | -0.37% | 0.06% | -0.56% | |
| EUR | -0.06% | -0.23% | 0.58% | 0.13% | -0.44% | 0.00% | -0.59% | |
| GBP | 0.17% | 0.23% | 0.80% | 0.39% | -0.20% | 0.24% | -0.38% | |
| CAD | -0.64% | -0.57% | -0.81% | -0.42% | -1.01% | -0.56% | -1.20% | |
| AUD | -0.20% | -0.13% | -0.38% | 0.43% | -0.57% | -0.13% | -0.77% | |
| JPY | 0.38% | 0.42% | 0.24% | 1.01% | 0.56% | 0.46% | -0.18% | |
| NZD | -0.05% | -0.01% | -0.23% | 0.57% | 0.13% | -0.47% | -0.65% | |
| CHF | 0.57% | 0.61% | 0.38% | 1.18% | 0.76% | 0.15% | 0.62% |
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 ECB is widely expected to leave key rates unchanged following the first policy meeting of the year. In case the policy statement, or ECB President Christine Lagarde, adopts a cautious tone regarding the inflation outlook and pushes back against market expectations for a rate cut this spring, the Euro could gather strength against its rivals. On the other hand, a dovish surprise, with Lagarde voicing concerns over the worsening growth outlook and opening the door to a reduction in key rates before June, could weigh heavily on EUR/USD.
Meanwhile, the US Bureau of Economic Analysis will release the first estimate of the annualized real Gross Domestic Product (GDP) growth for the fourth quarter. Markets expect the economy to expand by 2% following the 4.9% recorded in the previous quarter. A disappointing GDP print, at or below 1.5%, could trigger a USD selloff, while a reading at or slightly above the market consensus could support the USD.
It might be risky to bet on a steady directional movement in EUR/USD based on the ECB event or the US GDP data. The pair's volatility is likely to rise until the dust settles in the late American session.
EUR/USD Technical Analysis
EUR/USD faces strong resistance in the 1.0920-1.0930 area, where the 100-period and the 200-period Simple Moving Averages (SMA) on the 4-hour chart are located. Above this hurdle, 1.0960 (Fibonacci 23.6% retracement of the latest uptrend) aligns as next resistance ahead of 1.1000 (psychological level, static level).
On the downside, supports could be seen at 1.0865 (Fibonacci 38.2% retracement, 1.0830 (static level) and 1.0800 (psychological level.
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