EUR/USD: Enough Downside Momentum to Test 1.0636 – 1.0569

The Euro is edging lower against the U.S. Dollar on Tuesday as market nerves trumped any optimism from the re-election of French President Emanuel Macron.

Euro investors and hedge funds are also shedding long investments in the single-currency due to worries about economic growth because of the war in Ukraine.

Furthermore, an uncertain future about the direction of European Central Bank (ECB) policy is also keeping many investors on the sideline. They are basically looking for clarity in the timing of the ECB’s first interest rate hike.

At 11:59 GMT, the EUR/USD is trading 1.0672, down 0.0039 or -0.37%. On Monday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $99.29, down $0.72 or -0.72%.

The main factor keeping a lid on gains remains the divergence in policy between the U.S. Federal Reserve and the European Central Bank. Essentially, the Fed is hawkish and the ECB is less-hawkish (up from dovish). This is helping to make the U.S. Dollar a more attractive investment. Additionally, the U.S. economy is also expected to outperform the Euro Zone economy.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at 1.0670 will reaffirm the downtrend. A move through 1.0936 will change the main trend to up.

The minor range is 1.0936 to 1.0670. Its retracement zone at 1.0805 – 1.0836 is the nearest resistance. This zone will move down as the Forex pair moves lower.

Daily Swing Chart Technical Forecast

Trader reaction to 1.0712 is likely to determine the direction of the EUR/USD into the close on Tuesday.

Bearish Scenario

A sustained move under 1.0712 will signal the presence of sellers. Taking out the intraday low at 1.0670 will indicate the selling pressure is getting stronger. This could trigger a sharp break into the March 23, 2020 main bottom at 1.0636. This is the “Pandemic Bottom”.

Look for a technical bounce on the first test of 1.0636, but if it fails then look for the selling to possibly extend into the April 10, 2017 main bottom at 1.0569.

Bullish Scenario

A sustained move over 1.0712 will indicate the return of buyers. Taking out the intraday high at 1.0739 will indicate the buying is getting stronger. This move could create the upside momentum needed to challenge the minor retracement zone at 1.0805 to 1.0836. Since the main trend is down, sellers are likely to come in on a test of this area.