EUR/USD Closing Price Reversal Top May Be Signaling Possible Shift in Momentum

The Euro surged to its highest level since December 2014 on Thursday in response to hawkish comments from European Central Bank President Mario Draghi, but gave up enough of those early gains to finish lower for the session after U.S. President Donald Trump said he wanted a “stronger dollar”.

Early in the session, the European Central Bank left its monetary policy unchanged. However, the currency rallied to its high for the day after Draghi said economic data pointed to “solid and broad” growth with inflation likely to rise in the medium term.

Draghi also warned that the surge in the Euro was a source of uncertainty and said the ECB might have to review strategy if U.S. comments on the benefits of a weak dollar lead to a change in monetary conditions.

The EUR/USD settled at 1.2396, down 0.0010 or -0.08%.

Daily Swing Chart Analysis

The main trend is up according to the daily swing chart. However, Thursday’s closing price reversal top may be indicating a shift in momentum to down.

A trade through 1.2537 will negate the closing price reversal top and signal a resumption of the uptrend. This could trigger a rally into the December 16, 2014 main top at 1.2569.

A move through 1.2363 will confirm the closing price reversal top. This could lead to a 2 to 3 day correction or a 50% to 61.8% retracement of the last rally.

The short-term range is $1.2164 to 1.2537. Its retracement zone at 1.2351 to 1.2307 is the first downside target.

The intermediate range is 1.1915 to 1.2537. Its retracement zone is 1.2226 to 1.2153. This zone is the next downside target.

The major support is the long-term 50% level at 1.2166. The major resistance is the long-term Fibonacci level at 1.2597.

Daily Swing Chart Forecast

Based on the early price action, the direction of the EUR/USD today is likely to be determined by trader reaction to the short-term 50% level at 1.2351.

A sustained move over 1.2351 will signal the presence of buyers. This could trigger a retracement of yesterday’s wide range with 1.2537 the first target. Overcoming this level will indicate the buying is getting stronger with potential targets at 1.2537, 1.2569 and 1.2597.

A sustained move under 1.2537 will confirm the reversal top, but a move through 1.2351 will indicate the selling pressure is getting stronger. This could lead to a test of 1.2307. This is a possible trigger point for an acceleration into a series of retracement levels at 1.2226, 1.2166 and 1.2153.