EUR/USD Underpinned by Hawkish Remarks from ECB President Christine Lagarde

The Euro is edging higher at the mid-session on Thursday. The single-currency is being boosted by a weaker U.S. Dollar and expectations of more rate hikes by the European Central Bank (ECB).

At 17:00 GMT, the EUR/USD is trading 1.0813, up 0.0019 or +0.18%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $99.85, up $0.32 or +0.32%.

Lagarde Boosts Rate Hike Hopes

European Central Bank President Christine Lagarde on Thursday said inflation is far too high and that the ECB will keep raising interest rates.

“We shall stay the course until such a time when we have moved into restrictive territory for long enough so that we can return inflation to 2% in a timely manner,” she said in a panel discussion during the World Economic Forum in Davos, Switzerland.

US Economy Losing Momentum

The greenback is being capped on Thursday after a raft of data showed the U.S. economy is losing momentum.

U.S. data released on Wednesday showed retail sales fell by the most in a year in December and manufacturing output suffered its biggest drop in nearly two years, prompting a sharp drop in bond yields.

Looking Ahead…

Helping to hold the EUR/USD in a trading range on Thursday is a rise in Treasury yields after the release of a stronger-than-expected weekly jobless claims report.

Traders are now awaiting remarks from several Federal Reserve speakers that could influence the direction of the EUR/USD late in the session. On Wednesday, a pair of Fed officials set a hawkish tone when they called for the Fed to lift rates over 5.0%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0888 will signal a resumption of the uptrend. A move through 1.0766 will change the main trend to down.

On the upside, the nearest resistance is a price cluster at 1.0936 – 1.0943. On the downside, the closest support is a minor pivot at 1.0686.

Daily Swing Chart Technical Forecast

Trader reaction to 1.0827 is likely to determine the direction of the EUR/USD into the close on Thursday.

Bullish Scenario

A sustained move over 1.0827 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into 1.0888, followed by a main top at 1.0936 and a long-term 50% level at 1.0943.

Bearish Scenario

A sustained move under 1.0827 will signal the presence of sellers. Taking out the main bottom at 1.0766 will change the main trend to down with 1.0686 the next target. This is a potential trigger point for a further decline into the pivot at 1.0589.