EUR/USD Forex Technical Analysis – Next Major Downside Target Bottom 1.0838

The Euro plummeted against the U.S. Dollar on Friday as traders priced in a rate cut by the European Central Bank (ECB) at its policy meeting on September 12 as well as other forms of aggressive stimulus. Also supporting the dollar was a report on Friday that U.S. consumer spending increased solidly in July as households bought a range of goods and services.

On Friday, the EUR/USD settled at 1.0992, down 0.0065 or -0.59%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Friday when sellers took out the August 23 main bottom at 1.1052 and the August 1 main bottom at 1.1027

The main trend will change to up on a trade through the August 26 swing top at 1.1164.

Several retracement zones are lined up as resistance so even if there is a recovery on Monday, any rally is likely to be labored.

If 1.1164 to 1.0963 becomes a short-term range then its retracement zone at 1.1063 to 1.1087 will be the first resistance zone.

If 1.1250 to 1.10963 becomes an intermediate-term range then its retracement zone at 1.1106 to 1.1140 will become the next retracement zone.

The third potential resistance zone is 1.1286 to 1.0963. It retracement zone resistance is 1.1124 to 1.1163.

The major Fibonacci level controlling the longer-term direction is 1.1185.

Daily Swing Chart Technical Forecast

Based on Friday’s price action and the close at 1.0992, the direction of the EUR/USD on Monday is likely to be determined by trader reaction to Friday’s low at 1.1063.

Bearish Scenario

A sustained move under 1.0963 will indicate the presence of sellers. If this move generates enough downside momentum then this will continue to bring the EUR/USD closer to the May 11, 2017 main bottom at 1.0838.

Bullish Scenario

A sustained move over 1.0963 will signal the presence of buyers. If this move can create enough upside momentum then look for a potential short-covering rally into the first 50% level at 1.1063.

Taking out 1.0963 then turning higher for the session will put the EUR/USD in a position to form a potentially bullish closing price reversal bottom. This won’t change the trend but it could lead to a two to three day counter-trend rally.

We’re likely to see this chart pattern develop when we get closer to the ECB meeting.