EUR/USD Forex Technical Analysis – Near-Term Strength Over 1.0892, Near-Term Weakness Under 1.0831

The Euro reversed to the upside late Friday as investors, cautiously optimistic about the results of a drug trial and President Donald Trump’s plan to reopen the economy, regained some appetite for risk and in the process took profits in the U.S. Dollar ahead of the weekend.

In economic news, Euro Zone inflation slowed sharply in March to 0.7% year-on-year, the European Union statistics said on Friday confirming its earlier estimates.

Eurostat also confirmed its earlier estimates for core inflation figures in the 19-nation single currency bloc, which also point to weaker price increases last month.

Overall inflation fell to 0.7% from 1.2% in February, Eurostat said, further away from the European Central Bank’s target of below, but close to 2 percent over the medium term.

An indicator that excludes unprocessed food and energy prices, which the ECB calls core inflation and watches closely in policy decisions, showed prices grew 1.2% in annual terms, down from 1.3% in February, in line with previous estimates.

At 20:00 GMT, the EUR/USD is trading 1.0871, up 0.0032 or +0.29%.

French President Emmanuel Macron warned that the European Union could collapse unless it finds a way to share the costs of the crisis, the coronavirus has exposed the vulnerability of the single currency.

“EUR’s status might have been evolving since the COVID-19 outbreak but, going forward, we are bearish. This is because we expect European data to decouple further from US data, and that is partly due to the lack of a coordinated European fiscal response – which we remain concerned about,” wrote Bank of America strategists in a note to clients.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The main trend will change to up on a trade through the last main top at 1.0991. A move through the last main bottom at 1.0768 will signal a resumption of the downtrend.

The main range is 1.0636 to 1.1147. Its retracement zone at 1.0892 to 1.0831 is currently being tested. This zone is controlling the near-term direction of the EUR/USD.

The short-term range is 1.1147 to 1.0768. Its retracement zone at 1.0958 to 1.1002 is the next upside target. This zone stopped the rally on April 15 at 1.0991.

Short-Term Outlook

Friday’s minor closing price reversal bottom is impressive, but it’s not going to mean much unless there is a follow-through move to the upside. Furthermore, the EUR/USD really needs to take out 1.0991 to trigger some buy stops and perhaps fuel some aggressive short-selling.

Basically, look for buyers to try to develop an upside bias on a sustained move over 1.0892 with objectives coming in at 1.0958, 1.0991 and 1.1002.

On the downside, a sustained move under 1.0831 will signal the presence of sellers. Taking out 1.0812 will indicate the selling pressure is getting stronger. This could trigger a further break into the next main bottom at 1.0768.

The bottom at 1.0768 is a potential trigger point for an acceleration to the downside with 1.0636 the next major downside target.