EUR/USD Forecast: The tables are turning and 1.2000 is in sight

The EUR/USD is gaining for the second day in a row, riding on US Dollar weakness.
Draghi will likely stay mum and let the US indicators move the pair.
The technical picture remains bearish as the pair is no longer in oversold territory.

Yohay Elam FXStreet

The EUR/USD is trading around $1.1940, up on the day and for the second day in a row. The new 2018 trough at $1.1822 is now more distant. The primary driver is the weakness of the US Dollar. US Core inflation came out at 2.1%, below 2.1% expected for the month of April. Other inflation figures also missed expectations.

The Consumer Price Index report joins other disappointing data, with wage inflation sliding as well. The US Dollar enjoyed a relative advantage over the Euro as euro-zone numbers fell short, but the recent shortfalls align the greenback with the common currency.

Has the Dollar reached a peak? The inflation report may have been the final nail in the USD rally coffin

The last day of the week features a speech by Mario Draghi in Florence, Italy. Speaking in his home country, Draghi will likely try to say as little as possible about future monetary policy. He stated that the Governing Council did not discuss future moves in the recent meeting. So, in a speech about broader events in Europe, he may refrain from disclosing any market-moving news. Nevertheless, markets will listen carefully to whatever he says or does not say.

Another event to watch is the preliminary publication of the University of Michigan's Consumer Sentiment Index for May. It is expected to show a minor dip from 98.8 to 98.5 points. See how to trade the event with EUR/USD.

We may see some last-minute choppy movements after a week that saw the US Dollar reach new highs against several currencies before retreating.

EUR/USD Technical Analysis

The EUR/US is trading higher for the second day in a row and has exited the steep downtrend channel. Both indicators are positive. However, Momentum remains to the downside and the RSI has moved out of oversold territory. Some may see this as a sign that the pair could resume its drops.

The $1.1915 level that was the swing low in January is the immediate line of support. Further down, the fresh $1.1822 low is a critical line. Even lower, $1.1710 was a low point towards the end of 2017.

Looking up, the round number of $1.2000 is a strong cap and is closely backed up by the 200-day Simple Moving Average which is around $1.2015. The April 30th low of $1.2055 is next.

More: EUR/USD path of least resistance is to the upside for a change, for now — Confluence Detector

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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