EUR/USD Forex Technical Analysis – Sustained Move Under 1.0339 Puts .9860 on Radar
The Euro is trading nearly flat against the US Dollar on Friday, hovering near its weakest point since early 2017. The catalyst behind the weakness are Russian sanctions which led to disruptions in gas supplies to Europe. This is renewing fears about an economic slowdown in the Euro Zone.
The common currency has drilled lower in recent weeks by a combination of fears for the economy suffering from the fallout of the war in Ukraine, and a huge rally in the U.S. Dollar fueled by bets the Federal Reserve will deliver a series of big interest rate hikes to combat inflation.
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At 12:05 GMT, the EUR/USD is trading 1.0391, up 0.0012 or +0.11%. On Thursday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $96.09, down $1.31 or -1.35%.
Yields in the Euro Zone will continue to lag the United States by a significant margin. Even though investors expect the European Central Bank (ECB) to raise rates out of negative territory later this year, a widening interest rate differential could drive the Euro to parity with the dollar.
The divergence in monetary policy between the hawkish U.S. Federal Reserve and the dovish ECB is going to make it difficult to change the bearish trend over the short-run. Consequently, the Euro is going to have a hard time mounting a reasonable retracement of the current downtrend unless there is a major change in Ukraine.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through the January 3, 2017 main bottom at 1.0339 will reaffirm the downtrend. A trade through 1.0642 will change the main trend to up.
The minor range is 1.0642 to 1.0354. Its pivot at 1.0498 is the nearest resistance.
Daily Swing Chart Technical Forecast
The direction of the EUR/USD on Friday is likely to be determined by trader reaction to 1.0387.
Bearish Scenario
A sustained move under 1.3087 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into 1.0339. This level is a potential trigger point for an acceleration to the downside with the next major target the January 8, 2003 main bottom at 0.9860.
Bullish Scenario
A sustained move over 1.3087 will signal the presence of buyers. This move could create the upside momentum needed to challenge 1.0498 over the near-term.
Watch for sellers on the first test of 1.0498, and a potential acceleration into the resistance cluster at 1.0642 – 1.0645 over the short-run.