EUR/USD Forex Technical Analysis – Sustained Move Under .9860 Bottom Puts .9686 on Radar

The Euro finished lower against the U.S. Dollar on Tuesday, erasing earlier gains, after a report on the U.S. services industry in August reinforced the view that the United States was not in recession.

The single currency slipped away from parity with the dollar as the yield on benchmark 10-year U.S. Treasury notes jumped 14.3 basis points to 3.334% to highs last seen in June, on expectations the Federal Reserve will keep hiking interest rates as it tightens monetary policy in a bid to quell inflation.

On Tuesday, the EUR/USD settled at .9907, down 0.0025 or -0.25%. The Invesco CurrencyShares Euro Trust ETF (FXE) closed at $91.44, down $0.46 or -0.50%.

In the U.S., the dollar rose after the Institute for Supply Management said its non-manufacturing PMI edged up to a reading of 56.9 from 56.7 in July, the second straight monthly increase after three months of declines.

Meanwhile, European Union ministers will meet on Friday to discuss urgent measures to respond to a surge in gas and power prices that is hammering European industry and hiking household bills, after Russia curbed gas deliveries to the bloc.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the December 2, 2002 main bottom at .9860 will reaffirm the downtrend. A move through 1.0079 will change the main trend to up. This is highly unlikely, but due to the prolonged move down in terms of price and time, the EUR/USD begins Wednesday’s session inside the window of time for a potentially bullish closing price reversal bottom.

The minor trend is also down. A trade through .9986 will change the minor trend to up. This will shift momentum to the upside.

The minor range is .9864 to .9986. Its pivot at .9925 is the first resistance.

The second minor range is 1.0089 to .9864. Its pivot at .9977 is the second resistance and the third minor range is 1.0203 to .9864. Its 50% level at 1.0034 is the next resistance.

Short-Term Outlook

Trader reaction to the first minor pivot at .9925 is likely to determine the direction of the EUR/USD early Wednesday.

Bearish Scenario

A sustained move under .9925 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to extend into the December 2, 2002 main bottom at .9860. This is a potential trigger point for an acceleration into the October 21, 2002 main bottom at .9686.

Bullish Scenario

A sustained move over .9925 will signal the presence of buyers. If this creates enough upside momentum then look for a surge into the resistance cluster at .9977 to .9986. Taking out this area could trigger an acceleration into 1.0034. This is the last potential resistance before the pair of main tops at 1.0079 and 1.0089.