EUR/USD Forex Technical Analysis – Lower as Euro Zone Traders Trim Rate Hike Expectations
The Euro is down against the U.S. Dollar on Thursday but remains inside yesterday’s wide range, suggesting investor indecision and impending volatility.
The single-currency is being pressured by disappointing German and French PMI figures, which signaled a struggling economy. The news prompted many new longs to trim positions amid lower European Central Bank (ECB) rate hike expectations.
At 13:21 GMT, the EUR/USD is trading 1.0520, down 0.0049 or -0.47%. This is down from yesterday’s two-week high at 1.0606. On Wednesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $97.74, up $0.34 or +0.35%. Based on the early price action, it is expected to open lower on Thursday.
Traders Reduce Rate Hike Expectations
Following the weaker-than-expected PMI reports, money markets were pricing in about 30 basis points (bps) of rate hikes in July compared to 34 bps on Monday. Traders also trimmed their expectations of how much the ECB will hike rates by the end of 2022 to 161 bps compared to 176 bps on Monday.
US Flash PMIs on the Clock
The U.S. will release its Flash PMI data at 13:45 GMT. Traders are expecting Flash Manufacturing PMI to come in at 56.0, down from the previously reported 57.0. Flash Services PMI could come in at 53.9, up from 53.4.
Lower than expected data could push Treasury yields lower. This could be supportive for the EUR/USD.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through 1.0359 will signal a resumption of the downtrend. A move through 1.0774 will change the main trend to up.
The minor range is 1.0359 to 1.0606. Its 50% level at 1.0482 is support.
The short-term range is 1.0774 to 1.0359. Its retracement zone at 1.0586 to 1.0630 is resistance. It stopped the rally at 1.0606 on Wednesday.
Daily Swing Chart Technical Forecast
Trader reaction to 1.0537 is likely to determine the direction of the EUR/USD into the close on Thursday.
A sustained move under 1.0537 will signal the presence of sellers. This could trigger a retest of the minor pivot at 1.0482.
Taking out 1.0482 will be a sign of weakness. This could trigger an acceleration to the downside with potential targets a series of main bottoms at 1.0359, 1.0354 and 1.0339.
A sustained move over 1.0537 will signal the presence of buyers. This could trigger a surge into a cluster of levels including a short-term 50% level at 1.0586, a high at 1.0606 and a short-term Fibonacci level at 1.0630.
The Fib level at 1.0630 is a potential trigger point for an acceleration to the upside with the resistance cluster at 1.0770 – 1.0774 the next major target.