EUR/USD Daily Forecast – Euro Extends Recovery After Testing Major Support
German Retail Sales Tops Expectations in December
Retail sales in Germany rose 2.1% last month, beating out the analyst estimate for a rise of 1.1%. It was the first time the data beat expectations since the summer.
Services data was also better than expected with German, Italian, and Spanish PMI data all exceeding analyst expectations. French services PMI data was in line with expectations.
For the entire Euro area, the services PMI improved to a four-month high, also ahead of the analyst estimate. The positive data has kept the single currency underpinned after a decline last week on the back of disappointing manufacturing data.
EUR/USD has been trending higher since the start of the fourth quarter of 2019. Buyers look to have taken last week’s dip as an opportunity to get involved in the broader uptrend.
However, it might be too early to tell if the currency pair has resumed within its uptrend. The US dollar index (DXY) remains in the green for January and showed upward momentum last week that resulted in a reversal candle on a weekly chart. Price action among the majors over the past few weeks has been dominated by dollar fluctuations.
Technical Analysis
The EUR/USD recovery has reached resistance from a horizontal level at 1.1180. This level held the pair lower in October initially, and then several times since. On a weekly chart, the pair has yet to post a close above it.
Further, last week’s price action has led to a weekly candlestick print for EUR/USD that suggests exhaustion, or even reversal potential. Bulls might be cautious in light of this.
EUR/USD shows intraday strength and stands to rally higher but the daily close in relation to 1.1180 resistance will be important.
To the downside, support for the session ahead is seen at Friday’s daily close of 1.1156. A break above 1.1180 on an intraday basis would target the 1.1200 handle.
On a daily chart, the confluence of the 200 and 20-day moving averages held EUR/USD higher on Friday. This will continue to be a major support area for the pair in the early week.
Bottom Line
EUR/USD is extending the upward momentum that began at the US Open on Friday.
Resistance at 1.1180 is in play and has held the pair lower on a weekly basis since October.
This article was originally posted on FX Empire
