EUR/USD Forex Technical Analysis – Trader Reaction to 1.1093 Should Set the Tone Today

The Euro finished lower against the U.S. Dollar last week. The weakness was triggered by firming U.S. Treasury yields and increased demand for higher risk assets. The catalysts driving the price action were better-than-expected U.S. economic data and a report calling for aggressive moves by the European Central Bank (ECB) in order to perk up the economy.

Last week, the EUR/USD settled at 1.1090, down 0.0110 or -0.99%.

On the U.S. side, Thursday’s better-than-expected retail sales report helped calm worries that the U.S. was headed toward recession. The Euro was pressured by growing expectations of an interest rate cut by the European Central Bank (ECB) after Governing Council member Olli Rehn suggested on Thursday that the central bank could restart its quantitative easing program and was open to extending it into equity purchases.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. A trade through 1.1027 will signal a resumption of the downtrend. The swing chart shows there is plenty of room to the downside with the next major bottom coming in at 1.0569.

The main trend will change to up on a trade through 1.1413. The prolonged move down in terms of price and time means we may have to wait for a closing price reversal bottom before getting the next buy signal.

The minor trend is also down. A trade through 1.1250 will change the minor trend to up. This will also shift weekly momentum to the upside. 1.1027 is a minor bottom.

On the upside, the first resistance is a long-term Fibonacci level at 1.1185. This price is controlling the longer-term direction of the EUR/USD.

Weekly Technical Forecast

Based on last week’s price action and the close at 1.1090, the direction of the EUR/USD this week is likely to be determined by trader reaction to the short-term downtrending Gann angle at 1.1093.

Bearish Scenario

A sustained move under 1.1093 will indicate the presence of sellers. The first downside target is a potential support cluster formed by a minor bottom at 1.1027 and a long-term uptrending Gann angle at 1.1023. Look for a technical bounce on the first test of this area.

If 1.1023 fails as support then look for an acceleration into the downtrending Gann angle at 1.0976. Crossing to the weak side of this angle will put the EUR/USD in an extremely bearish position.

Bullish Scenario

A sustained move over 1.1093 will signal the presence of buyers. If this creates enough upside momentum then look for a potential rally into the major Fibonacci level at 1.1185. Overcoming this level will could trigger a surge into the minor top at 1.1250 and the downtrending Gann angle at 1.1253. Taking out these levels will shift momentum to the upside.