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James Hyerczyk

The Euro is trading lower late Friday, but profit-taking has allowed the single-currency to claw back more than half of its earlier losses. Firmer U.S. Treasury yields and increased demand for higher-yielding assets pressured the Euro early. The catalyst behind the selling was an article in the Wall Street Journal which said the European Central Bank will announce a package of stimulus measures at its next policy meeting in September that should exceed investors’ expectations, according to a top official at the central bank.

At 18:14 GMT, the EUR/USD is trading 1.1100, down 0.0009 or -0.09%.


Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.1027 will signal a resumption of the downtrend. The main trend will change to up on a move through the swing top at 1.1250. This is highly unlikely, however, the EUR/USD is down eight days from its last main top, which means we should start watching for a closing price reversal bottom.

The short-term range is 1.1027 to 1.1250. It is currently trading on the weak side of its retracement zone at 1.1112 to 1.1139, making it resistance. Overcoming this zone will indicate the return of buyers.


Daily Technical Forecast

Based on the early price action and the current price at 1.1100, the direction of the EUR/USD into the close is likely to be determined by the short-term Fibonacci level at 1.1112.

Bearish Scenario

A sustained move under 1.1112 will indicate the presence of sellers. If this move creates enough downside momentum then look for a retest of a downtrending Gann angle at 1.1090 and an uptrending Gann angle at 1.1082. If this angle is taken out then look for a possible move into the next uptrending Gann angle at 1.1055. This is the last potential support angle before the 1.1027 main bottom.

Bullish Scenario

A sustained move over 1.1112 will signal the presence of buyers. This will also put the EUR/USD higher for the session and in a position to post a potentially closing price reversal bottom, which could lead to a 2 to 3 ay counter-trend rally next week.

Overcoming the Fibonacci level at 1.1112 could trigger a strong short-covering rally with the short-term 50% level at 1.1139 the next potential upside target.

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