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James Hyerczyk

The Euro fell to a more than two-year low against the U.S. Dollar on Friday as a weak growth outlook weighed on the single currency. However, a drop in Treasury yields late in the session drove the greenback lower, triggering a short-covering rally into the close. Some traders attributed the recovery to a successful test of technical support levels.

On Friday, the EUR/USD settled at 1.0942, up 0.0021 or +0.20%.

According to some reports, the early selling was fueled by quarter-end rebalancing flows, which boosted demand for the greenback.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, Friday’s closing price reversal bottom may be signaling a short-term shift in sentiment, but not a short-term change in trend.

A trade through 1.0959 will confirm the closing price reversal bottom. This could trigger a two to three day counter-trend rally.

A move through 1.0905 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The short-term range is 1.1110 to 1.0905. Its retracement zone at 1.1007 to 1.1032 is the first upside target. Since the main trend is down, sellers could come in on a test of this zone.


Daily Swing Chart Technical Forecast

Based on Friday’s closing price reversal bottom and the close at 1.0942, the direction of the EUR/USD is likely to be determined by trader reaction to 1.0959.

Bearish Scenario

The inability to take out 1.0959 will indicate the return of sellers. This could trigger a retest of 1.0905. If this level fails as support then look for a potential acceleration to the downside with the May 11, 2017 main bottom at 1.0838 the next major downside target.

Bullish Scenario

Taking out 1.0959 will confirm the closing price reversal bottom. If this creates enough upside momentum then look for a minimum two to three day rally. The primary upside target is 1.1007 to 1.1032.

Since the main trend is down, sellers are likely to come in on a test of 1.1007 to 1.1032. They are going to try to form a secondary lower top, which could trigger the start of the next leg down.

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