EUR/USD Forex Technical Analysis – Failure to Extend Rally Through 1.2537 Will Indicate Return of Sellers

The Euro extended its rally against the U.S. Dollar last week. The catalysts behind the rally were dovish comments from U.S. Treasury Secretary Steven Mnuchin and hawkish comments from European Central Bank chief Mario Draghi.

Mnuchin said he wants a weaker dollar because it will be good for trade. Draghi hinted that stimulus could be withdrawn earlier than expected. However, he also expressed concerns about the rapidly rising Euro and its possible impact on the decision to trim stimulus.

The EUR/USD finished the week at 1.2428, up 0.0213 or +1.74%.

Weekly Swing Chart Analysis

The main trend is up according to the weekly swing chart. A trade through 1.2537 will signal a resumption of the uptrend. This is followed closely by the December 16, 2014 main top at 1.2569 and the long-term Fibonacci level at 1.2597.

The weekly chart indicates there is plenty of room to the downside with the first major target coming in at 1.2166.

Weekly Swing Chart Forecast

This is the seventh week up since the last main bottom at 1.1717 so technically, the EUR/USD begins the week in the window of time for a possible closing price reversal top. This means the most important level this week will be last week’s close at 1.2428.

A sustained move over 1.2428 will signal the presence of buyers. This could create the upside momentum to challenge 1.2537, 1.2569 and 1.2597. The latter is a possible trigger point for an acceleration to the upside.

A sustained move under 1.2428 will indicate the presence of sellers. This could start the EUR/USD toward an eventual test of 1.2166.

The most bearish formation will be a move through 1.2537 then a break back under 1.2428. This would put the Forex pair in a position to form a closing price reversal top.