EUR/USD Forex Technical Analysis – Lower after Lagarde Downplays Recession, Aggressive Rate Hikes
The Euro is edging lower on Tuesday after European Central Bank (ECB) President Christine Lagarde failed to deliver the hawkish outlook on interest rates that investors were expecting.
Earlier in the session, the single currency fell below $1.06 after Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations.
The price action suggests investors were looking for Lagarde to talk up the possibility of more aggressive rate hikes especially after she downplayed the possibility of a recession.
After Lagarde spoke, money markets were pricing in about 238 basis points (bps) of cumulative rate hikes by mid-2023 compared to around 280 bps two weeks ago.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. However, momentum is trending higher.
A trade through 1.0774 will change the main trend to up. A move through 1.0359 will signal a resumption of the downtrend.
The short-term range is 1.0774 to 1.0359. Its retracement zone at 1.0567 to 1.0616 stopped the rally on Monday at 1.0615.
The minor range is 1.0359 to 1.0615. Its pivot at 1.0487 is the nearest downside target.
Daily Swing Chart Technical Forecast
Trader reaction to 1.0567 is likely to determine the direction of the EUR/USD into the close on Tuesday.
A sustained move under 1.0567 will indicate the presence of sellers. If this creates enough downside momentum then look for sellers to make a run at the pivot at 1.0487.
Counter-trend buyers could come in on the first test of 1.0487. A failure to hold this level, however, could trigger an acceleration to the downside with a support cluster at 1.0359 to 1.0339 the next major target.
A sustained move over 1.0567 will signal the presence of buyers. If this generates enough upside momentum then look for a surge into the resistance cluster at 1.0615 – 1.0616. Since the main trend is down, look for sellers on the first test of this area.
Overtaking 1.0616, however, could trigger the start of a counter-trend acceleration to the upside.