EUR/USD Forecast – Main Trend Up but Momentum Trending Lower Ahead of Fed, ECB Rate Decisions

The Euro is edging lower against the U.S. Dollar on Tuesday after data showed a little growth in the Euro Zone in the final three months of 2022. The data means the region avoided a recession even as sky-high energy costs, waning confidence and rising interest rates took a toll on the economy that is likely to persist into this year.

At 12:30 GMT, the EUR/USD is trading 1.0831, down 0.0021 or -0.19%. On Monday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $70.42, up $0.53 or +0.76%.

Gross domestic product across the currency bloc expanded by a tiny 0.1% in the fourth quarter, data from Eurostat showed on Tuesday, outperforming expectations in a Reuters poll for a 0.1% drop. Compared to a year earlier, growth was 1.9%, just beating expectations of 1.8%.

In addition to the surprise GDP reading, more recent reports like consumer confidence or the latest PMI data suggest growth may have hit bottom already and a slow recovery is underway, helped by generous government support and a mild winter that has limited energy spending.

Furthermore, it likely means the economy will be able to absorb a 50 basis point rate hike by the ECB on Thursday without triggering a hard recession.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower.

A trade through 1.0930 will signal a resumption of the uptrend, while a move through 1.0766 will change the main trend to down.

The minor trend is down. This is controlling the momentum.

The EUR/USD is trading on the weak side of a minor pivot at 1.0848, making it resistance. The major resistance is a long-term 50% level at 1.0943. The major support is a short-term 50% level at 1.0707.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at 1.0848 is likely to determine the direction of the EUR/USD on Tuesday.

Bearish Scenario

A sustained move under 1.0848 will indicate the presence of sellers. The first downside target is the main bottom at 1.0766. Taking out this level will change the main trend to down with 1.0707 the next target.

Bullish Scenario

A sustained move over 1.0848 will signal the presence of buyers. If this generates enough upside momentum then look for a surge into the resistance cluster at 1.0930 – 1.0936.

Taking out the long-term 50% level at 1.0943 could trigger an acceleration to the upside.