EUR/USD Forex Technical Analysis – Down Trend Continues Ahead of German ifo Business Climate Report

The Euro is trading at its lowest level since March 24 early Friday as a division over Europe’s emergency fund dragged down the single-currency. According to reports, the European Union agreed to build a trillion Euro emergency fund, but left the details for later.

With Italy and Spain hit far harder than Germany by the crisis, old enmities have surfaced across a bloc which faces a cut to output as deep as 15% according to the European Central Bank (ECB).

“We have no idea how it will be funded and this is not the panacea to stop an impending 15% contraction in GDP,” said Chris Weston, head of research at Melbourne brokerage Pepperstone.

At 07:25 GMT, the EUR/USD is trading 1.0735, down 0.0042 or -0.39%.

Preliminary goods-orders data in the United States and a German business sentiment survey due later on Friday are unlikely to improve investors’ mood – especially as the global recovery begins to look increasingly rocky.

In the Euro Zone, the German ifo Business Climate report is expected to come in at 79.8, down from 86.1. The report is due to be released at 08:00 GMT.

At 12:30 GMT, the U.S. will release a report on Core Durable Goods Orders and Durable Goods Orders. Core Durable Goods are expected to have fallen by -6.1% and Durable Goods Orders by -12.0%.

At 14:00 GMT, Revised University of Michigan Consumer Sentiment is expected to come in at 67.8, down from 71.0.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Thursday when sellers took out the previous main bottom at 1.0768, and resumed early today when the previous session’s low failed. The next major downside target is the March 23 main bottom at 1.0636.

The main trend will change to up on a trade through 1.0991. This is highly unlikely, but due to the prolonged move down in terms of price and time, traders should watch for bottoming action in the form of a closing price reversal bottom.

The minor trend is also down. A trade through the minor tops at 1.0885 and 1.0897 will change the minor trend to up. This will also shift momentum to the upside.

The short-term range is 1.0636 to 1.1147. Its retracement zone at 1.0831 to 1.0892 is resistance.

Daily Swing Chart Technical Forecast

Momentum is trending lower early Friday. If it continues then look for a near-term test of 10636.

On the upside, the key intraday level to watch is 1.0776. Closing over this level will form a closing price reversal bottom. This won’t change the trend, but it could trigger the start of a 2 to 3 day counter-trend rally.