EUR/USD Forex Technical Analysis – Lower as Short-Covering Rally Fizzles

The Euro is trading lower against the U.S. Dollar late in the session on Friday as the single-currency gave back some of yesterday’s gains. Volume was light as the market posted an inside trading range, suggesting investor indecision and impending volatility.

The price action also suggests that Thursday’s rally was primarily fueled by short-covering since there wasn’t a follow-through rally.

While the stronger U.S. Dollar was applying pressure to the common currency, a dip in U.S. Treasury yields was helping to limit losses.

At 19:04 GMT, the EUR/USD is trading 1.0495, down 0.0056 or -0.53%. The Invesco CurrencyShares Euro Trust ETF (FXE) settled at $97.06, down $0.62 or -0.64%.

Economic News:  Euro Zone Inflation Confirmed at Record High 8.1% in May

Euro Zone inflation rose to a record high 8.1% last month in line with a preliminary estimate, more than four times the European Central Bank’s (ECB) target and underscoring its plans to raise interest rates next month to tame runaway price growth.

Price growth across the 19 countries sharing the Euro rose to 8.1% in May from 7.4% in April, in line with a preliminary estimate published on May 31, the European Union’s statistics agency Eurostat said on Friday.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher following the confirmation of Wednesday’s closing price reversal bottom.

A trade through 1.0774 will change the main trend to up. A move through 1.0359 will negate the chart pattern and signal a resumption of the downtrend.

The minor range is 1.0359 to 1.0601. The EUR/USD is currently straddling its pivot at 1.0480.

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 1.0601 on Thursday.

Daily Swing Chart Technical Forecast

Trader reaction to 1.0480 is likely to determine the direction of the EUR/USD into the close on Friday.

Bullish Scenario

A sustained move over 1.0480 will indicate the presence of buyers. If this move creates enough upside momentum then look for a potential surge into 1.0586 – 1.0630.

Bearish Scenario

A sustained move under 1.0480 will signal the presence of seller. This could trigger a late session break into 1.0359.