EUR/USD Forex Technical Analysis – Pressured by Position-Squaring Ahead of ECB Interest Rate Decision

The Euro is down against the U.S. Dollar on Tuesday ahead of the European Central Bank’s policy-setting meeting on Thursday, where it is expected to announce an end to bond purchases, paving the way for a first rate increase in 11 years at the July meeting.

At 11:56 GMT, the EUR/USD is trading 1.0659, down 0.0037 or -0.34%. On Monday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $99.01, down $0.22 or -0.22%.

In the U.S., worries about persistent inflation are pushing Treasury yields higher, helping to give the U.S. Dollar a boost.

Euro Zone Investor Morale Rises

Investor morale in the Euro Zone rose more than expected in June, the first increase after Russia’s invasion of Ukraine, a survey showed on Tuesday, as many companies have not yet felt as much impact from inflation and supply bottlenecks as feared, Reuters reported.

Sentix’s index for the Euro Zone rose to -15.8 points in June from -22.6 in May, which had been the weakest figure since June 2020. A Reuters poll had pointed to a June reading of -20.0.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. A trade through 1.0764 and 1.0787 will reaffirm the uptrend. A move through 1.0627 will change the main trend to down.

The minor trend is down. This is controlling the momentum. Another sign of a shift in momentum is the formation of the secondary lower top.

The main range is 1.1185 to 1.0354. Its retracement zone at 1.0770 to 1.0868 is resistance. This area stopped the rally at 1.0787 on May 30.

The short-term range is 1.0354 to 1.0787. If the main trend changes to down then look for the selling to possibly extend into its retracement zone at 1.0571 to 1.0519.

The minor range is 1.0787 to 1.0627. The EUR/USD is currently trading on the weak side of its pivot at 1.0707, making it resistance.

Daily Swing Chart Technical Forecast

Trader reaction to 1.0707 is likely to determine the direction of the EUR/USD on Tuesday.

Bearish Scenario

A sustained move under 1.0707 will indicate the presence of sellers. The first downside target is the main bottom at 1.0627.

Taking out 1.0627 will change the main trend to down with 1.0571 to 1.0519 the next likely target area.

Bullish Scenario

A sustained move over 1.0707 will signal the presence of buyers. If this creates enough upside momentum then look for the move to possibly extend into the main top at 1.0764, the main 50% level at 1.0770 and another main top at 1.0787.