EUR/USD Forex Technical Analysis – Bulls Facing Next Challenge at 1.0770 – 1.0868

The Euro edged higher on Friday, posting its second weekly advance as traders pared expectations for U.S. Federal Reserve interest rate hikes and as improving inflation and consumer spending data eased recession fears.

Earlier in the week, minutes from the Fed’s May meeting showed most participants believed 50 basis-point hikes would be appropriate at the June and July policy meetings, but many thought big, early hikes would allow room to pause later in the year to assess whether tighter policy is helping to tame inflation.

On Friday, the EUR/USD settled at 1.0734, up 0.0003 or +0.03%. The Invesco CurrencyShares Euro Trust ETF (FXE) finished at $99.36, up $0.09 or +0.09%.

U.S. economic news drove the price action on Friday. Although prices continued to increase in April, it rose less than in recent months, according to the Fed’s favorite inflation report.

The personal consumption expenditures (PCE) price index rose 0.2%, the smallest gain since November 2020, after shooting up 0.9% in March. For the 12 months through April, the PCE price index advanced 6.3% after jumping 6.6% in March.

A separate report showed U.S. consumer spending rose more than expected last month as households boosted purchases of goods and services.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The next target is the main top at 1.0936. A trade through 1.0354 will change the main trend to down.

The minor trend is also up. A trade through 1.0642 will change the minor trend to down. This will shift momentum to the downside.

The short-term range is 1.0936 to 1.0354. The EUR/USD closed on the strong side of its retracement zone at 1.0714 to 1.0645, making it support.

The main range is 1.1185 to 1.0354. Its retracement zone at 1.0770 to 1.0868 is the primary upside target. Sellers could come in on the first test of this zone.

Short-Term Outlook

Trader reaction to the main 50% level at 1.0770 will likely determine the direction of the EUR/USD early Monday.

Bullish Scenario

A sustained move over 1.0770 will indicate the presence of buyers. If this move is able to generate enough upside momentum, it could surge into the Fibonacci level at 1.0868. This is the last potential resistance before the 1.0936 main top.

Bearish Scenario

A sustained move under 1.0770 will signal the presence of sellers. This could trigger a quick break into the short-term Fibonacci level at 1.0714. If this fails then look for the selling to possibly extend into the short-term 50% level at 1.0645. This is the last potential support before the 1.0642 minor bottom.