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EUR/USD Forex Technical Analysis – Underpinned as Investors Trim US Rate Hike Expectations

By:
James Hyerczyk
Updated: Jun 24, 2022, 13:04 UTC

Overnight, traders dialed down bets on where interest rates might peak and brought forward the timing of rate cuts to counter a possible recession.

EUR/USD

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The Euro is inching higher, but trading inside a tight range on Friday after posting a steep loss the previous session. That move was fueled by weaker-than-expected PMI figures for June and Germany’s move to trigger the “alarm stage” of its emergency gas plan.

At 12:40 GMT, the EUR/USD is trading 1.0527, up 0.0006 or +0.05%. On Thursday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $97.16, down $0.58 or -0.59%.

Investors Dialing Down Rate Hike Expectations

Some of the strength in the EUR/USD is being attributed to the weaker U.S. Dollar, which slipped on Friday as traders dialed down bets on where interest rates might peak and brought forward the timing of rate cuts to counter a possible recession, according to Reuters.

What this means is that investors have started betting the Fed could slow the rate-tightening pace following another 75 basis-point increase in July, and may start easing policy after March 2023.

Despite the shifting outlook in U.S. rates, the Euro isn’t taking off to the upside because terminal rate repricing is happening across the developed world as recession fears grow. In other words, rate hikes are also being taken out of the Euro.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since June 16.

A trade through 1.0774 will change the main trend to up. A move through 1.0359 will signal a resumption of the downtrend.

The minor range is 1.0359 to 1.0606. Its pivot at 1.0482 is support. This price has underpinned the common currency for six straight sessions.

The short-term range is 1.0774 to 1.0359. Its retracement zone at 1.0586 to 1.0630 is resistance. This zone stopped the rally at 1.0606 on June 22.

Daily Swing Chart Technical Forecast

Trader reaction to 1.0537 is likely to determine the direction of the EUR/USD on Friday.

Bearish Scenario

A sustained move under 1.0537 will signal the presence of sellers. This could trigger a retest of the minor pivot at 1.0482.

Taking out 1.0482 will be a sign of weakness. This could trigger an acceleration to the downside with potential targets a series of main bottoms at 1.0359, 1.0354 and 1.0339.

Bullish Scenario

A sustained move over 1.0537 will signal the presence of buyers. This could trigger a surge into a cluster of levels including a short-term 50% level at 1.0586, a high at 1.0606 and a short-term Fibonacci level at 1.0630.

The Fib level at 1.0630 is a potential trigger point for an acceleration to the upside with the resistance cluster at 1.0770 – 1.0774 the next major target.

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

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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