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James Hyerczyk
EurDollar Notes

The Euro closed higher against the U.S. Dollar on Friday, reversing early session weakness to post a potentially bullish closing price reversal bottom. Technical buyers came in to stop the price slide as the market approached its August 15 bottom. Fundamentally, the rebound rally was fueled by a report showing weak inflation. The Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index excluding food and energy, missed expectations after it increased 1.6 percent in the third quarter.

On Friday, the EUR/USD settled at 1.1403, up 0.0029 or +0.25%.

The core PCE price index rose at a 2.1 percent pace in the April-June period. Weak inflation data may cause the Fed to pause the pace of its planned interest rate hikes, which would make the U.S. Dollar a less-desirable asset.


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 potential shift in momentum to up. This move won’t change the trend, but it could fuel the start of a 2-3 day counter-trend rally.

A trade through 1.1335 will negate the closing price reversal bottom and signal a resumption of the downtrend. This could lead to an eventual test of the 1.1301 main bottom.

The main trend will change to up on a trade through 1.1555, followed by the next swing top at 1.1622.

The short-term range is 1.1555 to 1.1335. Its retracement zone at 1.1445 to 1.1471 is the first upside target zone.

The main range is 1.1301 to 1.1816. Its retracement zone at 1.1498 to 1.1559 is the next retracement zone target.

Daily EURUSD (Close-Up)

Daily Swing Chart Technical Forecast

Based on Friday’s price action and the close at 1.1403, the direction of the EUR/USD early Monday is likely to be determined by trader reaction to Friday’s high at 1.1422.

Bullish Scenario

A trade through 1.1422 will confirm the closing price reversal bottom. This could trigger a counter-trend rally into a series of retracement levels at 1.1445, 1.1471 and 1.1498.

Bearish Scenario

The inability to overtake 1.1422 and confirm the reversal bottom will signal the presence of sellers. This could trigger a quick break into a minor pivot at 1.1379, followed by the reversal bottom at 1.1335 and the August 15 bottom at 1.1301.

Technical Catalyst

The technical catalyst that will drive the price action today will be the confirmation of Friday’s closing price reversal bottom. Taking out and sustaining a move over 1.1422 will indicate counter-trend buyers have shifted momentum to the upside. A failure at 1.1422 will indicate that sellers are still in control.

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