EUR/USD Forex Technical Analysis – Testing Key Area, Setting Up for Major Move

The Euro fell last week in reaction to comments from Italian Deputy Prime Minister Matteo Salvini that European Union rules harm his country. The single-currency was also pressured by stronger-than-expected U.S. economic data, particularly consumer sentiment, which helped dampen the chances of a U.S. recession and a Fed rate cut.

This week, investors will start focusing on the May 23-26 elections for the new European Parliament. Traders will also be watching for a private purchasing managers’ index that measures activity in services and manufacturing due on Thursday, after Germany last week returned to growth in the first quarter of 2019.

If good PMIs are released then there’s a good chance the Euro will hit a low and begin a short-covering rally.

Last week, the EUR/USD settled at 1.1157, down 0.0077 or -0.68%.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. A trade through 1.1448 will change the main trend to up.

A move through 1.1112 will reaffirm the downtrend, but additional support is sitting at 1.1109. This is a critical area according to the weekly swing chart because the next major bottom is at 1.0339.

Due to the prolonged move down in terms of price and time, traders should also watch for a potentially bullish closing price reversal bottom chart pattern.

The major, long-term range is 1.0339 to 1.2555. Its major retracement zone is 1.1447 to 1.1185. The EUR/USD has been hanging around the lower or Fibonacci level at 1.1185 long-enough to make this price a key pivot level.

Weekly Technical Forecast

Based on last week’s price action and the close at 1.1157, the direction of the EUR/USD this week is likely to be determined by trader reaction to the major Fibonacci level at 1.1185.

Bearish Scenario

A sustained move under 1.1185 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the last minor bottom at 1.1112. This is followed by another main bottom at 1.1109. If this bottom fails then the selling could possibly extend into the next major uptrending Gann angle at 1.0954.

Bullish Scenario

Overtaking and sustaining a rally over 1.1185 will signal the presence of buyers. This could trigger a rally into a major downtrending Gann angle at 1.1235. This angle is very important to the long-term structure of the chart pattern. It stopped the rally last week and the week-ending March 22.

Watch the price action and read the order flow on a test of 1.1235 this week because strong buying volume on a rally through this level could launch the start of a very strong rally.