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EUR/USD Forex Technical Analysis – Gaps Lower Amid Increasing Risk of European Recession

By:
James Hyerczyk
Published: Sep 5, 2022, 03:04 UTC

The sharp drop on the opening has put the single-currency in a position to test its recent 20-year low of .9901.

EUR/USD

In this article:

The Euro gapped lower early Monday after Russia shut down a major gas pipeline to Europe, leading some governments there to announce emergency measures to ease the pain of soaring energy prices.

The sharp drop on the opening and the subsequent follow-through selling has put the single-currency in a position to test its recent 20-year low of .9901 as market participants priced in more risk of a European recession. Furthermore, the early downside momentum suggests this level will not hold.

At 02:32 GMT, the EUR/USD is trading .9908, down 0.0049 or -0.49%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $91.90, up $0.06 or +0.07%.

The common currency is under pressure because Russia announced that a pipeline carrying natural gas to Europe would remain shut indefinitely for maintenance and repairs.

According to Reuters, European Union ministers will meet on Sept. 9 to discuss urgent bloc-wide measures to respond to a surge in gas and power prices that is hammering Europe’s industry and hiking household bills, after Russia curbed gas deliveries to the bloc.

EU ministers are expected to discuss options to rein in soaring energy prices including gas price caps and emergency credit lines for energy market participants, a document seen by Reuters showed.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed earlier today when sellers took out .9914. A trade through the next main bottom at .9901 will be further affirmation of the downtrend.

A trade through 1.0079 will change the main trend to up. A move through 1.0089 will reaffirm the uptrend.

The nearest resistance is a pair of 50% levels at .9995 and 1.0052.

Daily Swing Chart Technical Forecast

Trader reaction to .9957 will determine the direction of the EUR/USD on Monday.

Bearish Scenario

A sustained move under .9957 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the main bottom at .9901.

Taking out .9901 could trigger a break into the December 2, 2002 main bottom at .9860. This is a potential trigger point for an acceleration to the downside with the October 21, 2002 main bottom at .9686 another major target.

Bullish Scenario

A sustained move over .9957 will signal the presence of buyers. If this generates enough upside momentum then look for the rally to possibly extend into the pivot at .9995.

Side Notes

Monday’s weak opening formed a daily gap at .9936 to .9943.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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