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James Hyerczyk

The EUR/USD finished lower on Friday, capping a very bearish week. Early in the week, the Forex pair rallied on hawkish comments about inflation from European Central Bank President Mario Draghi. However, this rally stalled when Draghi said this news wouldn’t change the ECB’s plan to begin raising rates after the summer of 2019.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of a closing price reversal top at 1.1816 on September 24. A trade through this top will negate the chart pattern and signal a resumption of the uptrend.

The main trend will change to down on a trade through 1.1526.

The minor trend is down. This confirms the shift in momentum to down.

The main range is 1.1301 to 1.1816. Its retracement zone at 1.1559 is the primary downside target. The main bottom is also inside this zone. Since the main trend is up, watch for buyers to show up on a test of this zone.

If a new short-term range forms between 1.1816 and 1.1570 then watch for a possible rebound rally into its retracement zone at 1.1693 to 1.1722.


Daily Swing Chart Technical Forecast

Based on Friday’s close at 1.1604 and the price action, the direction of the EUR/USD on Monday is likely to be determined by trader reaction to the 50% level at 1.1559.

A sustained move over 1.1559 will indicate the presence of buyers. If this move can generate enough upside momentum then look for the rally to possibly extend into the short-term retracement zone at 1.1693 to 1.1722. Aggressive counter-trend sellers could come in on a test of this zone.

A sustained move under 1.1559 will signal the presence of sellers. This could spike the market into the main bottom at 1.1526. Taking out this bottom will change the main trend to down. This could extend the selling into the Fibonacci level at 1.1498.

We could see a technical bounce on the first test of 1.1498. If it fails then look for a potential acceleration to the downside under this level. The daily chart indicates there is plenty of room to the downside with 1.1301 the next likely downside target.

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