EUR/USD Challenging 1.1308 – 1.1265 Retracement Zone

The Euro is trading lower on Monday as investors continued to dump the common currency in favor of the safe-haven U.S. Dollar. The single currency is also being pressured by last week’s dovish comments from European Central Bank (ECB) President Lagarde, soaring inflation and the prospect of war in Europe.

At 09:08 GMT, the EUR/USD is trading 1.1311, down 0.0037 or -0.33%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $105.32, down $0.86 or -0.81%.

The Euro tumbled late last week after Lagarde said in an interview that raising rates now would not bring down record Euro Zone inflation but only slow down economic growth. Additionally, the market started to price in a 50 basis point rate hike by the Fed in March after U.S. inflation hit a 40-year high. Finally, the United States thinks Russia could invade Ukraine at any time.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.1495 will change the main trend to up. A move through 1.1122 will reaffirm the downtrend.

The short-term range is 1.1122 to 1.1495. Its retracement zone at 1.1308 to 1.1265 is the next downside target and potential support. The EUR/USD is currently testing the upper or 50% level of this zone.

On the upside, the resistance is a pair of retracement zones at 1.1407 to 1.1475 and 1.1516 to 1.1608. The levels helped stop the rally last week at 1.1495.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD into the close on Monday is likely to be determined by trader reaction to 1.1308 to 1.1265.

Bullish Scenario

A sustained move over 1.1308 will indicate the presence of aggressive counter-trend buyers. If this move creates enough upside momentum then look for a possible retest of the main 50% level at 1.1407.

Bearish Scenario

A sustained move under 1.1308 will indicate the selling pressure is getting stronger. This could lead to a test of the short-term Fibonacci level at 1.1265.

The Fib level at 1.1265 is a potential trigger point for an acceleration to the downside with the main bottom at 1.1122 the next major target.