EUR/USD Monthly Technical Analysis for June 2016

The EUR/USD closed down 0.0314, or -2.74% at 1.1131 in May after the European Commission cut its growth forecast for the Euro Zone economy early in the month and on renewed expectations of a sooner-than-expected Fed rate hike.

The EC said it sees Euro Zone gross domestic product (GDP) in 2016 at 1.6 percent from a previous forecast of 1.7 percent growth. It also lowered its 2017 forecast to 1.8 percent from 1.9 percent.

Meanwhile, an improving economy prompted investors to begin pricing in a possible rate hike by the Fed as early as June. Investors should know early this month whether the Fed will raise rates in June.

The U.S. Non-Farm Payrolls report should set the tone on June 3. If the report is strong enough then the Fed may raise rates on June 15. A weak report will likely be supportive for the EUR/USD because it will likely mean a June rate hike is off the table.

Technically, the main trend is down according to the monthly swing chart. The closing price reversal top in May indicates June is likely to begin under selling pressure. A trade through last month’s low at 1.1097 will confirm the chart pattern. A trade through 1.1616 will negate the chart pattern.

The short-term range is 1.1712 to 1.0539. Its 50% level or pivot comes in at 1.1125. This price is also controlling the near-term direction of the market.

The main range is 1.3993 to 1.0462. If there is a breakout to the upside then its retracement zone at 1.2228 to 1.2644 will become the primary upside target.

Based on the close at 1.1137, the direction of the market today is likely to be determined by trader reaction to 1.1097.

A sustained move under 1.1097 will indicate the presence of sellers. This could drive the market into the nearest uptrending angle at 1.1019. Crossing to the weak side of the downtrending angle at 1.0912 will indicate the selling is getting stronger. This could trigger a sharp break into the next uptrending angle at 1.0779. This is the last potential support angle before the 1.0539 and 1.0462 main bottoms.

A sustained move over the pivot at 1.1125 will signal the presence of buyers. This could create enough upside momentum to test the nearest downtrending angle at 1.1312. Crossing to the strong side of the uptrending angle at 1.1499 will indicate the buying is getting stronger. This could lead to a test of the downtrending angle at 1.1512.

The angle at 1.1512 is the last potential resistance angle before the 1.1616 closing price reversal top and the 1.1712 main top. This are potential trigger points for accelerations to the upside.

Look for a bullish tone to develop on a sustained move over 1.1125 and a bearish tone under 1.1097.

Traders should also look for increased volatility on June 3 and June 15. We could see an expanded range this month. The trigger point for a huge rally is 1.1712 and for a huge break is 1.0539. If investors are still undecided about the Fed rate hike, we could see a two-sided trade on both sides of the 1.1125 pivot.