EUR/USD Forex Technical Analysis – Trader Reaction to 1.2243 Will Set the Early Tone

The Euro rose against the U.S. Dollar for the fourth straight session on Tuesday, reaching its highest level since February 25 as fears over a sooner than expected rate hike by the Federal Reserve subsided despite raging U.S. inflation. Meanwhile, investors are now betting on a stronger recovery in Europe as economies reopen and vaccination rates increase.

At 20:38 GMT, the EUR/USD is trading 1.2224, up 0.0072 or +0.59%.

Gains were limited early in the session after 10-year U.S. Treasury yields edged up to 1.65%, but prices rose late as yields moved slightly lower.

The focus now shifts to the Fed minutes which are expected to be released at 18:00 GMT on Wednesday. Investors will be poring over the minutes for any indications as to the Fed’s view on rising inflation.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.2224 will signal a resumption of the uptrend. A move through 1.2243 will reaffirm the uptrend. The main trend will change to down on a move through the last swing bottom at 1.2052.

The main range is 1.2243 to 1.1704. The EUR/USD is trading well above its retracement zone at 1.2037 to 1.1973, which is the key support. It is also controlling the near-term direction of the single-currency.

Short-Term Outlook

Trader reaction to the February 25 main top at 1.2243 will set the tone early Wednesday as traders prepare for the release of the Fed minutes.

Volume could drive up early in the session so a breakout over 1.2243 could be delayed until the volume picks up after the Fed minutes are released at 18:00 GMT.

Traders are likely to be betting on an upside breakout because the minutes are expected to reiterated the Fed’s view that inflation was transient.

The daily chart indicates there is plenty of room to the upside on a breakout over 1.2243 with 1.2349 the next likely target.

For a look at all of today’s economic events, check out our economic calendar.