EUR/USD Forex Technical Analysis – No Visible Support Until 1.0838

The Euro fell to a two-year low against the U.S. Dollar on Wednesday as U.S. Federal Reserve Chairman Jerome Powell ruled out a lengthy easing cycle after the Federal Open Market Committee delivered its first rate cut since the financial crisis in 2008.

In a widely expected move, the Fed cut its benchmark rate by 25 basis points to tighten up the economy against risks including the trade dispute. However, the Euro plunged after Powell said in his press conference, “it’s not the beginning of a long series of rate cut.” He later said, “I didn’t say it’s just one rate cut.” But the damage was done as traders interpreted the comments several ways including “not so dovish as expected”, “neutral” and “neutral to hawkish.”

On Wednesday, the EUR/USD settled at 1.1107, down 0.0078 or -0.70%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.1060 will reaffirm the downtrend. The main trend will change to up on a trade through 1.1282. This is highly unlikely but at eight days down, we could see a closing price reversal bottom.

The daily chart is wide open to the downside with the May 11, 2017 bottom at 1.0838 the next major target.

On the upside, the nearest resistance is the long-term Fibonacci level at 1.1185.

Daily Swing Chart Technical Forecast

Based on Wednesday’s price action and the close at 1.1107, the direction of the EUR/USD on Thursday is likely to be determined by trader reaction to yesterday’s low at 1.1060.

The Fed news is either bearish for the Euro (bullish for the Dollar) or not. There is no half-way. The EUR/USD should continue to weaken because the Fed was somewhat hawkish and the European Central Bank is going to implement more stimulus in September. That is a bearish scenario.

Ultimately, it is the spread between U.S. Government bonds and German government bonds that will determine the direction of the EUR/USD. If it continues to widen then the EUR/USD will plunge.