EUR/USD Forecast – Trader Reaction to 1.0442 Pivot Sets the Early Tone
The Euro is trading lower late in the session on Tuesday after European Central Bank policymaker Constantinos Herodotou said interest rates will go up again but are now “very near” their neutral level.
The single currency was also pressured by a stronger greenback, which was underpinned by investors trying to position ahead of next week’s expected interest rate hike from the U.S. Federal Reserve.
ECB to Hike Again but “Very Close” to Neutral rates – Herodotou
European Central Bank interest rates will go up again but are not “very near” their neutral level, ECB policymaker Constantinos Herodotou said on Tuesday.
“We are very near the neutral rate. There will be I think another hike or hikes,” Herodotou, Cyprus’ ECB Governing Council member, told a Bloomberg event.
Having raised rates by a combined 200 basis points since July, the ECB is expected to hike by another 50 basis points on December 15, slowing the pace of policy tightening after bank-to-back 75 point moves, Reuters reported.
Herodotou also said he doesn’t see a “hard landing” recession, however, he added, “There will be more rate hikes to contain inflation.”
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. However, momentum shifted to the downside on Tuesday when sellers confirmed yesterday’s closing price reversal top.
A trade through 1.0595 will negate the chart pattern and signal a resumption of the uptrend. A move through 1.0290 will change the main trend to down.
The nearest resistance is a Fibonacci level at 1.0560. The nearest support is a minor pivot at 1.0442, followed by a longer-term 50% level at 1.0366.
Daily Swing Chart Technical Forecast
Trader reaction to 1.0442 is likely to determine the direction of the EUR/USD early Wednesday.
A sustained move over 1.0442 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into 1.0560, followed by the minor top at 1.0595 and the June 27 main top at 1.0615.
A sustained move under 1.0442 will signal the presence of sellers. This could trigger a hard break into the 50% level at 1.0366, followed by the main bottom at 1.0290. Taking out this level will change the main trend to down and could trigger an acceleration to the downside. The daily chart indicates the next major support is 1.0076.