EUR/USD Forex Technical Analysis – Treading Water Ahead of US Consumer Price Index Data

The Euro is edging higher against the U.S. Dollar on Monday as the single-currency recovered some of the losses it had made from Friday’s surprisingly strong U.S. jobs report. The price action suggests investors are covering shorts and adjusting positions ahead of Wednesday’s U.S. consumer inflation report that could give them more clues about the Federal Reserve’s next steps.

At 11:05 GMT, the EUR/USD is trading 1.0195, up 0.0016 or +0.16%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $94.02, down $0.65 or -0.69%.

Higher-than-expected U.S. employment figures last Friday drove the dollar sharply higher against most major currencies because the data was viewed by investors as an indication that the Fed could raise interest rates more aggressively to combat inflation.

In domestic news, investor morale in the Euro Zone was essentially unchanged in August from the previous month, with a slight rise too little to stave off fears of recession in the 19-country currency bloc, a survey showed on Monday.

Sentix’s index for the Euro Zone inched up to -25.2 points from -26.4 in July. A Reuters poll had pointed to an August reading of -24.7.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0294 will reaffirm the uptrend. A move through 1.0097 will change the main trend to down.

The minor trend is also up. A trade through 1.0254 will indicate the return of buyers. A move through 1.0123 will change the minor trend to down.

The minor range is 1.0097 to 1.0294. The EUR/USD is currently straddling its pivot at 1.0196.

On the downside, potential support is a short-term retracement zone at 1.0123 to 1.0083.

On the upside, the nearest resistance is a short-term 50% level at 1.0284, followed by an intermediate retracement zone at 1.0363 to 1.0460.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at 1.0196 is likely to determine the direction of the EUR/USD on Monday.

Bullish Scenario

A sustained move over 1.0196 will indicate the presence of buyers. If this move creates enough upside momentum then look for a test of the minor top at 1.0254, followed by the resistance cluster at 1.0284 to 1.0294.

Bearish Scenario

A sustained move under 1.0196 will signal the presence of sellers. This could trigger a break into the short-term retracement zone at 1.0123 to 1.0083.

Since the main trend is up, buyers are likely to come in on a test of the retracement zone. If it fails then look for the start of an acceleration to the downside.