EUR/USD Forex Technical Analysis – Spikes Higher on Possible 50 Basis Point Hike in September

The Euro is trading higher against the U.S. Dollar on Tuesday, following comments from European Central Bank Chief Economist Philip Lane that a larger 50 basis point hike is possible at the meeting in September.

Lane also said the ECB would not revisit its decision from earlier in the month to raise interest rates by 25 basis points at its next meeting in July.

At 13:08 GMT, the EUR/USD is trading 1.0555, up 0.0045 or +0.42%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $97.06, down $0.62 or -0.64%.

According to Lane, the exit from negative rates would be done in two stages, first by lifting the negative 0.5 percent deposit rate to minus 0.25 percent in July and by a possibly larger amount in September.

“With inflation rising sharply, there has been good reason to expedite the normalization of monetary policy,” ECB Governing Council member Olli Rehn said.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since June 15.

A trade through 1.0359 will signal a resumption of the downtrend. A move through 1.0774 will change the main trend to up.

The minor range is 1.0359 to 1.0601. Its 50% level at 1.0480 is support.

The short-term range is 1.0774 to 1.0359. Its retracement zone at 1.0567 to 1.0616 is resistance.

The main range is 1.1185 to 1.0354. Its retracement zone at 1.0770 – 1.0868 is controlling the near-term direction of the single-currency.

Daily Swing Chart Technical Forecast

Trader reaction to the 50% level at 1.0567 is likely to determine the direction of the EUR/USD into the close on Tuesday.

Bullish Scenario

A sustained move over 1.0567 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into 1.0601 – 1.0616.

Overtaking the short-term Fibonacci level at 1.0616 will be a sign of strength. This could trigger an acceleration into the resistance cluster at 1.0770 – 1.0774.

Bearish Scenario

A sustained move under 1.0567 will signal the presence of sellers. This could trigger a break into the pivot at 1.0480.

Counter-trend buyers could come in on a test of 1.0480. A failure to hold this level will be a sign of weakness.