Does the Euro Have Enough Upside Momentum to Reach 1.1547?

The Euro is testing its highest level against the U.S. Dollar since November 11 on Thursday after U.S. consumer inflation proved weaker than feared in December, prompting investors to trim long positions in the U.S. Dollar.

December’s monthly U.S. inflation figures, published on Wednesday, were a fraction higher than forecast and the increase in year-on-year consumer price inflation was as expected at 7% – its biggest jump since June 1982.

At 13:10 GMT, the EUR/USD is trading 1.1462, up 0.0022 or +0.19%. On Wednesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $106.41, up $0.76 or +0.72%.

The move in the EUR/USD is more about U.S. Dollar liquidation than it is about a strong Euro. Although investors are still predicting a March rate hike by the Fed and rates as high at 1.75% – 2.00% by the end of the year, they aren’t as certain about the timing of the first rate hike as they were earlier in the week. Furthermore, some traders also believe the European Central Bank (ECB) could raise interest rates earlier than expected.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at 1.1478 will signal a resumption of the uptrend. A move through 1.1272 will change the main trend to down.

The EUR/USD is currently trading on the strong side of a short-term 50% level at 1.1439, making it support.

The minor range is 1.1272 to 1.1478. Its 50% level at 1.1375 is new support.

The main range is 1.1909 to 1.1186. Its retracement zone at 1.1547 to 1.1633 is the primary upside target. Sellers could come in on the first test of this area. It is controlling the near-term direction of the EUR/USD.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Thursday is likely to be determined by trader reaction to 1.1439.

Bullish Scenario

A sustained move over 1.1439 will indicate the presence of buyers. If this generates enough upside momentum then look for a near-term surge into 1.1547 to 1.1633.

Bearish Scenario

A sustained move under 1.1439 will signal the presence of sellers. If this move creates enough downside momentum then look for a break into the minor 50% level at 1.1375. Since the main trend is up, buyers could come in on the first test of this level.