Our EURUSD forecast sees the pair trading initially in the green on the 4-hour chart after reaching the 1.1877 level. But the pair has been struggling after the US Dollar Index (DXY) managed to resume its rebound.
There is a strong negative correlation between the DXY and EUR/USD, which means they tend to move in opposite directions – that is beginning to play out today.
The pair remains under strong selling pressure in the short term. The current appreciation could be a temporary phenomenon as the US CB Consumer Confidence was reported significantly higher at 127.3 versus 1118.9 expected. Traders may be interpreting that as a harbinger of more positive US economic data to come.
US economy humming
Tomorrow, the US is releases the ADP Non-Farm Employment Change, the Chicago PMI, and the Pending Home Sales, which wall provide more food for thought in measuring the temperature of the economic rebound. More positive data will provide fresh impetus for the onward march on the dollar.
On the euro side of the equation, German Preliminary CPI increased by 0.4% as expected by surveyed economists. In June inter month CPI came in at 0.5%, which translates into a 12-month rate of 2.3%.
European Central Bank Chairwoman Christine Lagarde speaks this evening in Brussels and forex traders will be looking for straws in the wind regarding monetary policy.
EURUSD forecast: technical analysis – could drop lower on DXY strength
EUR/USD failed to reach the 50% retracement level and the weekly R1 (1.1990) signalling strong sellers. Now is located at 1.1902 below the weekly pivot point and under the 61.8% retracement level.
It could retest these levels before dropping deeper. Stabilizing under these levels could bring a new selling opportunity with a potential downside target at the S1 (1.1863) level. Technically, only coming back above the immediate upside obstacles could be an important trading signal an important growth.
A larger downside movement could be confirmed only if EUR/USD drops and stabilizes under 1.1847 lower low.
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