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James Hyerczyk

The Euro finished higher on Friday, following-through to the upside and confirming Thursday’s closing price reversal bottom. The move doesn’t reflect a change in policy by the European Central Bank, but rather a reaction to a plunge in U.S. Treasury yields, which made the U.S. Dollar a less-desirable investment.

Yields are falling because traders believe a weakening U.S. economy will force the Fed to cut rates later in the year. This thought was supported by a weaker-than-expected U.S. manufacturing PMI report, which indicated the U.S.-China trade dispute was having a negative impact on the economy.

On Friday, the EUR/USD settled at 1.1206, up 0.0023 or +0.21%.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum shifted to the upside with the formation of the closing price reversal bottom and subsequent confirmation.

The main trend will change to up on a trade through the last main top at 1.1264. This is followed by main tops at 1.1265 and 1.1324.

A trade through 1.1108 will negate the closing price reversal bottom and signal a resumption of the downtrend. The daily chart indicates there is plenty of room to the downside so don’t be surprised if there is a steep break. The next major target under 1.1108 is the May 11, 2017 main bottom at 1.0838.

On the upside, the major retracement zone is 1.1185 to 1.1447. This zone is controlling the longer-term direction of the EUR/USD.

The intermediate range is 1.1448 to 1.1108. Its retracement zone target is 1.1278 to 1.1318.

The short-term range is 1.1264 to 1.1108. Its retracement zone is 1.1186 to 1.1204. The EUR/USD is currently straddling this zone.


Daily Swing Chart Technical Forecast

Based on Friday’s close at 1.1206, the direction of the EUR/USD over the near-term is likely to be determined by trader reaction to the major Fibonacci level at 1.1185.

Bullish Scenario

A sustained move over 1.1185 will indicate the presence of buyers. The first target is the short-term Fibonacci level at 1.1204. This is a potential trigger point for an acceleration to the upside with potential targets coming in at 1.1264, 1.1265 and 1.1278.

Bearish Scenario

A sustained move under 1.1185 will signal the presence of sellers. This could trigger a move into 1.1161, followed by 1.1108.

Monday is a U.S. holiday so volume is likely to be well-below average and the trading range tight.

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