EUR/USD Forecast: Euro remains fragile ahead of key data releases
|- EUR/USD rebounded modestly after testing 1.0900 on Wednesday.
- German inflation and employment-related data from the US will be watched closely.
- Near-term technical outlook doesn't yet point to a build-up of recovery momentum.
EUR/USD staged a technical correction and stabilized below 1.0950 early Thursday after testing 1.0900 on Wednesday. The pair's technical outlook is yet to point to an extended recovery as investors remain cautious while waiting for key macroeconomic data releases.
The US Dollar (USD) benefited from the cautious market stance mid-week and continued to outperform the Euro. Meanwhile, the relatively hawkish tone seen in the minutes of the Federal Reserve's (Fed) December meeting minutes helped the currency hold its ground 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 US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 1.07% | 0.36% | 0.56% | 0.80% | 1.61% | 0.59% | 0.86% | |
| EUR | -0.94% | -0.57% | -0.38% | -0.15% | 0.56% | -0.36% | -0.13% | |
| GBP | -0.35% | 0.57% | 0.23% | 0.45% | 1.35% | 0.24% | 0.44% | |
| CAD | -0.56% | 0.34% | -0.01% | 0.23% | 1.05% | 0.02% | 0.26% | |
| AUD | -0.81% | 0.14% | -0.43% | -0.24% | 0.68% | -0.21% | 0.01% | |
| JPY | -1.62% | -0.54% | -1.24% | -0.88% | -0.67% | -0.89% | -0.87% | |
| NZD | -0.57% | 0.35% | -0.19% | -0.01% | 0.24% | 0.87% | 0.24% | |
| CHF | -0.81% | 0.13% | -0.43% | -0.22% | 0.02% | 0.83% | -0.20% |
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 Fed's publication showed that several policymakers noted that situations could justify maintaining the policy rate at its current level for a longer duration than their current expectations. According to the CME Group FedWatch Tool, markets are currently pricing in a 72% probability that the Fed will lower the policy rate by 25 basis points in March, down from 85% earlier in the week.
Later in the session, inflation data from Germany will be watched closely by market participants. Earlier in the day, regional data from Germany showed that the annual inflation in North Rhine-Westphalia, as measured by the change in the Consumer price Index (CPI), rose to 3.5% in December from 3% in November. Markets expect the CPI to increase by 3.8% on a yearly basis. A stronger-than-forecast CPI print could help the Euro find demand in the early American session.
The US economic docket will feature ADP Employment Change for December, which is forecast to rise 115,000. Ahead of Friday's Nonfarm Payrolls (NFP) report, a noticeable upside surprise in ADP, with a print of 150,000 or above, could make it difficult for EUR/USD to gather bullish momentum even if the initial reaction to German inflation report appears to be Euro-positive.
EUR/USD Technical Analysis
The 200-period Simple Moving Average (SMA) on the 4-hour chart aligns as immediate support for EUR/USD at 1.0920 before 1.0880 (lower limit of the ascending regression trend channel). A 4-hour close below the latter could open the door for an extended slide toward 1.0850 (Fibonacci 38.2% of the latest uptrend).
On the upside, strong resistance seems to have formed at 1.0950-1.0960 (100-period SMA, Fibonacci 23.6% retracement) ahead of 1.1000 (psychological level, static level) and 1.1020 (50-period SMA).
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