EUR/USD Daily Forecast – Euro Continues To Rebound Against U.S. Dollar

U.S. Dollar Is Losing Ground Against Euro

EUR/USD is currently trying to settle above the resistance at 1.2130 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index is currently trying to settle below 90.40. The nearest significant support level for the U.S. Dollar Index is located at 90.30. If the U.S. Dollar Index declines below this level, it will head towards the support level at the 90 level which will be bullish for EUR/USD.

Today, Germany reported that Inflation Rate grew by 1% year-over-year in January, in line with the analyst consensus. On a month-over-month basis, Inflation Rate increased by 0.8%. Later, attention of foreign exchange market traders will shift to U.S. Inflation Rate report which is projected to show that Inflation Rate increased by 1.5% year-over-year in January.

Euro has recently rebounded against U.S. dollar as the number of new coronavirus cases in Europe declined and traders increased purchases of riskier currencies. However, it remains to be seen whether this rebound will be sustainable as the European economy will likely remain weak in the first quarter.

Technical Analysis

EUR/USD managed to get above the 50 EMA at 1.2105 and is trying to settle above the next resistance level at 1.2130. If this attempt is successful, EUR/USD will head towards the resistance at 1.2155.

A move above the resistance at 1.2155 will push EUR/USD towards the next resistance level which is located at 1.2175. This resistance level has been tested many times in January and proved its strength. Most likely, EUR/USD will need additional catalysts to settle above 1.2175.

If EUR/USD gets above the resistance at 1.2175, it will head towards the next resistance level at 1.2220. No important levels were formed between 1.2175 and 1.2220 so this move may be fast.

On the support side, the 50 EMA at 1.2105 will serve as the first support level for EUR/USD. The 20 EMA is located in the nearby so EUR/USD will likely get material support in the 1.2095 – 1.2105 area. If EUR/USD settles below 50 EMA and 20 EMA, it will head towards the next support level at 1.2080. A move below this level will open the way to the test of the support at 1.2060.