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James Hyerczyk
Euros Notes 2

The Euro is inching lower against the U.S. Dollar early Tuesday after plunging 0.22% on Monday. Pressing the single currency were renewed concerns about Italy’s budget deficit.

According to reports, Italian Deputy Prime Minister Luigi Di Maio accused European Union officials of deliberately upsetting financial markets with negative comments about Italy’s budget plans. He was essentially firing a shot at European Economic Affairs Commissioner Pierre Moscovici, who earlier in the session said that Rome’s plans were “obviously” deviating from EU rules on fiscal discipline.

At 0403 GMT, the EUR/USD is trading 1.1572, down 0.0007 or -0.06%.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of a closing price reversal top on September 24. A trade through 1.1526 will change the main trend to down. A move through 1.1816 will negate the reversal top and signal a resumption of the uptrend.

The minor trend is also down. It turned down on September 27 when sellers took out the minor bottom at 1.1650. This move confirmed the shift in momentum to the downside.

The main range is 1.1301 to 1.1816. Its retracement zone at 1.1559 to 1.1498 is the primary downside target. Inside this zone is the last main bottom at 1.1526. Buyers could come in on a test of this zone in an effort to defend the trend so be careful shorting weakness.

If a short-term range forms between 1.1816 and 1.1561 then its retracement zone at 1.1688 to 1.1719 will become the primary upside target.


Daily Swing Chart Technical Forecast

Based on Monday’s price action and the close at 1.1579, the direction of the EUR/USD on Tuesday is likely to be determined by trader reaction to the 50% level at 1.1559.

A sustained move over 1.1559 will indicate the presence of buyers. If the buying is strong enough then traders will try to take out yesterday’s high at 1.1625. If they do then 1.1561 will become a minor bottom. This could lay the groundwork for a rally into the 1.1688 to 1.1719 retracement zone.

A sustained move under 1.1559 will signal the presence of sellers. Increased selling pressure could drive the EUR/USD into the main bottom at 1.1526. If it fails then the trend will change to down and the selling will likely continue into the Fibonacci level at 1.1498.

Despite the change in trend, watch for a technical bounce on a test of 1.1498. This is where you can get trapped selling weakness. Watch the order flow and price action on a test of this level. If the Fib level fails then look out to the downside. The daily chart doesn’t show any support coming in until 1.1301.

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