EUR/USD Forecast – Hovering Near 9-Month High on Hawkish ECB Member Comments

The Euro is edging higher against the U.S. Dollar on Monday but off a nine-month peak reached earlier in the session.  Driving the single-currency into it highest level since April 21 were comments on European interest rates signaling additional jumbo rate rises contrasted with market pricing for a less aggressive Federal Reserve.

At 12:20 GMT, the EUR/USD is trading 1.0872, up 0.0016 or +0.15%. This is down from an intraday high of 1.0927. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $100.18, up $0.24 or +0.24%.

Higher Rate Hike Expectations Supporting Price Rise

Today’s early session strength in the EUR/USD is being fueled by comments from European Central Bank (ECB) governing council member Klaas Knot, who said interest rates would rise by 50 basis points in both February and March and continue climbing in the months after.

In contrast, futures have priced out almost any chance the Fed could move by 50 basis points next month and have steadily lowered the likely peak for rates to 4.75% to 5.0%, from the current 4.25% to 4.50%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the April 21 main top at 1.0936 will reaffirm the uptrend. A move through 1.0766 will change the main trend to down.

The nearest resistance is a long-term 50% level at 1.0943. The closest support is a short-term 50% level at 1.0686.

Daily Swing Chart Technical Forecast

Trader reaction to 1.0856 is likely to determine the direction of the EUR/USD on Monday.

Bullish Scenario

A sustained move over 1.0856 will indicate the presence of buyers. This could create the upside momentum needed to challenge a resistance cluster at 1.0936 – 1.0943. The latter is a potential trigger point for an acceleration into the March 31 main top at 1.1185.

Bearish Scenario

A sustained move under 1.0856 will signal the presence of sellers. The first downside target is a minor pivot at 1.0846, followed by the main bottom at 1.0766.

Taking out 1.0766 will change the main trend to down with the next target the short-term pivot at 1.0686.

Side Notes

A close under 1.0856 will form a closing price reversal top. This won’t change the trend, but if confirmed, it could trigger the start of a 2 to 3 day sell-off.