EUR/USD Forex Technical Analysis – Trader Reaction to Short-Term Pivot at 1.1640 Sets Early Tone Next Week

The Euro rose against the U.S. Dollar on Friday after a report showed Euro Zone inflation expectations hit the European Central Bank target of 2%. Gains may have been capped, however, buy a report that showed Euro Zone business growth slowed in October.

On Friday, the EUR/USD settled at 1.1644, up 0.0021 or +0.18%.

A key market gauge of Euro Zone inflation expectations rose above the ECB’s inflation target of 2% for the first time in seven years on Friday, just as the central bank weighs how to proceed with stimulus when its pandemic-era support ends.

The so-called five-year, five-year forward inflation swap jumped by as much as 10 basis points to 2.0528%, the highest since 2014.

Additionally, growth in Euro Zone business activity slowed this month as firms faced soaring costs due to supply-chain constraints, while the bloc’s dominant service industry struggled amid ongoing COVID-19 concerns, a survey showed on Friday.

IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI), a good gauge of overall economic health, fell to a six-month low of 54.3 in October from 56.2 in September.

That matched the lowest forecast in a Reuters poll which had predicted a more modest drop to 55.2 but was still comfortably above the 50-mark which separates growth from contraction.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher.

A trade through 1.1755 will change the main trend to up. A move through 1.1524 will signal a resumption of the downtrend.

The minor trend is up. This is generating the upside momentum. A trade through 1.1669 will indicate the buying is getting stronger. A move through 1.1572 will change the minor trend to down.

Based on the close at 1.1644, the support is a series of 50% levels at 1.1640, 1.1621 and 1.1597.

The main range is 1.1909 to 1.1524. Its retracement zone at 1.1717 to 1.1762 is the next potential upside target and resistance.