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EUR/USD Forex Technical Analysis – Rally Stalls Ahead of 1.0645 – 1.0714 Retracement Zone Resistance

By:
James Hyerczyk
Updated: May 20, 2022, 20:32 UTC

Trader reaction to 1.0855 is likely to determine the direction of the EUR/USD on Friday. 

EUR/USD

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The Euro is edging lower against the U.S. Dollar on Friday as Treasury yields firmed. Nonetheless, it’s been a good week for the single currency, following hawkish comments from a key European Central Bank (ECB) official.

On Tuesday, Dutch central bank governor and ECB policymaker Klaas Knot said that the bank should keep the door open to a 50 bps hike if upcoming data suggested inflation was “broadening further or accumulating”.

At 12:26 GMT, the EUR/USD is trading 1.0574, down 0.0011 or -0.10%. On Thursday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $98.06, up $1.18 or +1.22%.

Money Markets Predicting 50/50 Chance of 50 bps July ECB Hike

Euro Zone money markets on Friday ramped up their bets on a 50 basis-point interest rate hike from the European Central Bank in July that would bring the bank’s policy rate to 0%.

Knot’s speech shifted market expectations, and on Friday traders priced in as much as 38 bps of hikes by July. That suggested a 25 bps hike is fully priced in, and a 52% probability of an additional 25 bps move.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the May 13 closing price reversal bottom. A trade through 1.0642 will change the main trend to up. A move through 1.0354 will negate the chart pattern and signal a resumption of the downtrend.

The minor range is 1.0642 to 1.0354. Its pivot at 1.0339 is the nearest support.

The short-term range is 1.0936 to 1.0354. If the main trend changes to up then look for the rally to possibly extend into its retracement zone at 1.0645 to 1.0714.

The main range is 1.1185 to 1.0354. Its retracement zone at 1.0770 to 1.0868 is the major resistance area.

Daily Swing Chart Technical Forecast

Trader reaction to 1.0586 is likely to determine the direction of the EUR/USD on Friday.

Bullish Scenario

A sustained move over 1.0586 will indicate the presence of buyers. Taking out 1.0607 will indicate the buying is getting stronger. This could trigger a surge into the resistance cluster at 1.0642 – 1.0645.

Sellers could come in on the first test of 1.0642 – 1.0645. Overtaking 1.0645, however, could trigger a surge into 1.0714.

Bearish Scenario

A sustained move under 1.0585 will signal the presence of sellers. This could trigger a break into 1.0498.

Look for counter-trend buyers on the first test of 1.0498. If it fails then look for the EUR/USD to make a move toward the support cluster at 1.0354 to 1.0339.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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