EUR/USD Forex Technical Analysis – Pressured by Pessimism about Outlook for Global Economy

The Euro is trading lower late in the session on Friday as pessimism about the outlook for the global economy boosted demand for the safe-haven U.S. Dollar.

The single currency is hovering just above a 5-year low as data on Friday showed that Euro Zone inflation hit another record high in June, while manufacturing production in the bloc fell for the first time in two years.

Meanwhile, the greenback caught a bid even as concerns about an economic downturn sent benchmark 10-year U.S. Treasury yields to one-month lows.

Trapping the US Dollar are concerns that the Federal Reserve will continue to hike rates aggressively in an effort to blunt soaring price pressures, and the likelihood that this tightening will hurt the economy.

At 17:26 GMT, the EUR/USD is trading 1.0394, down 0.0090 or -0.86%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $96.17, down $0.74 or -0.76%.

Looking ahead, the European Central Bank (ECB) is expected to raise interest rates this month for the first time in a decade, although economists are divided on the size of any hike.

Short-Term Outlook

Trader reaction to the intraday pivot at 1.0427 is likely to determine the direction of the EUR/USD into the close on Friday.

Bearish Scenario

A sustained move under 1.0427 will indicate the presence of sellers. If this creates enough downside momentum then look for a test of the intraday low at 1.0366.

Taking out 1.0366 will indicate the selling pressure is getting stronger with potential targets recent main bottoms at 1.0359 and 1.0354, followed by the January 3, 2017 main bottom at 1.0339.

A failure to hold 1.0339 could trigger the start of a near-term break into the December 2, 2002 main bottom at .9860.

Bullish Scenario

A sustained move over 1.0427 will signal the presence of buyers. If this generates enough upside momentum then look for a possible surge into the minor pivot at 1.0487.

Sellers could come in on the first test of 1.0487, but overtaking it could trigger an acceleration into the short-term retracement zone at 1.0567 to 1.0616.