EUR/USD Forex Technical Analysis – Break Through 1.0097 Main Bottom Puts .9952 on Radar

The Euro is trading lower early Friday after plunging to its lowest level since July 15 the previous session. The selling pressure was fueled by a surge in the U.S. Dollar after Federal Reserve officials mentioned the need for further rate hikes.

Investors also changed the tone of Wednesday’s Fed minutes, shifting from dovish and less-hawkish to hawkish. Stronger-than-expected U.S. economic data also weighed on the common currency.

At 04:06 GMT, the EUR/USD is at 1.0076, down 0.0011 or -0.11%. On Thursday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $93.23, down $0.83 or -0.88%.

The events supporting the U.S. Dollar more than offset comments from European Central Bank (ECB) board member Isabel Schnabel who said Euro Zone inflation has failed to improve since a July rate hike. Her comment was interpreted to mean that she favors another large interest rate interest increase next month even as recession risks harden.

Despite the hawkish tone from the Fed officials, the target rate probability for a 50 basis point rate hike in September is sitting at 59.5% and the probability of a 75 basis point rate hike remains at 40.5%. This sets up the classic battle between the Fed and the Market. Who’s right? We won’t know for 33 days.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.0123 changed the trend to down, while a move through 1.0097 reaffirmed the downtrend.

The minor trend is also down. A move through 1.0203 will change the minor trend to up and shift momentum to the upside.

The short-term range is .9952 to 1.0368. The EUR/USD is trading below its retracement zone at 1.0111 to 1.0160, making it resistance.

Daily Swing Chart Technical Forecast

Trader reaction to the short-term Fibonacci level at 1.0111 is likely to determine the direction of the EUR/USD early Friday.

Bearish Scenario

A sustained move under 1.0111 will indicate the presence of sellers. If this move creates enough downside momentum then look for an eventual trend into the July 14 main bottom at .9952. This is followed by the December 2, 2002 main bottom at .9860.

Bullish Scenario

A sustained move over 1.0111 will signal the presence of buyers. This could trigger a rally into the short-term 50% level at 1.0160, followed by the minor top at 1.0203.

Taking out 1.0203 will change the minor trend to up, shifting momentum to the upside.