EUR/USD Forex Technical Analysis – Getting Close to 1.2166 to 1.2136 Support Zone; Could See Some Short-Covering

The Euro finished sharply lower for a second session on Monday as investors continued to react to rising U.S. Treasury yields and expectations of even further rate hikes by the Fed later this year. Rising rates helped widen the spread between U.S. Government Bonds and German Bunds, making the U.S. a more attractive investment.

On Monday, the EUR/USD finished the session at 1.2207, down 0.0079 or -0.65%. This was its lowest close since February 28.

With the U.S. government reporting First Quarter GDP on Friday, sellers may decide to take a breather because this report will help determine the pace of future Fed rate hikes. If the number misses the 2.0% estimate then this could trigger a reversal down in U.S. interest rates and a reversal up in the EUR/USD.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Monday when sellers took out the previous main bottom at 1.2214.

The first downside target is the major, long-term 50% level at 1.2166. This is followed by another main bottom at 1.2153. Taking out this bottom will also reaffirm the downtrend and signal that the selling is getting stronger.

The main range is 1.1717 to 1.2555. Its retracement zone at 1.2136 to 1.2037 is a potential downside target. Aggressive counter-trend buyers could come in on a test of this zone. This is followed by the 2018 close at 1.20006.

Daily Swing Chart Technical Forecast

Based on Monday’s close at 1.2207, the direction of the EUR/USD on Tuesday is likely to be determined by trader reaction to the major 50% level at 1.2166.

Holding above 1.2166 will indicate that buyers are coming in to support the Euro. The buying could be profit-taking or aggressive counter-trend positions. There is no upside target at this time so any rally is likely going to be driven by short-covering.

A sustained move under 1.2166 will signal the presence of sellers. This could lead to a quick break into 1.2153 then 1.2136.

We could see a technical bounce on the first test of 1.2136. If it fails then watch for an acceleration to the downside with the next major target coming in at 1.2037.