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James Hyerczyk

The Euro is trading lower against the U.S. Dollar early Thursday but inside yesterday’s wide range. The Euro extended its losses on Wednesday and the U.S. Dollar rose with the single-currency retreating from the key 1.2000 level reached the previous session.

Wednesday’s counter-trend sell-off was attributed to profit-taking and technical resistance to the 1.2000 mark hit Tuesday, spurred on by comments from European Central Bank (ECB) chief economist Philip Lane, who said that the Euro/Dollar rate “does matter” for monetary policy. Lane’s comments show that ECB policymakers were rattled by the recent rapid appreciation of the Euro and the dramatic plunge in the dollar.

At 02:42 GMT, the EUR/USD is trading 1.1829, down 0.0026 or -0.22%.

The Euro was 0.65% lower on Wednesday at 1.1830, having retraced all of the gains it made since Fed Chair Jerome Powell’s speech last Thursday.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on September 1 and the subsequent confirmation of the potentially bearish chart pattern on Wednesday.

The main trend will change to down on a move through the last main bottom at 1.1754, while a move through 1.2011 will negate the closing price reversal top and signal a resumption of the uptrend.

The short-term range is 1.1711 to 1.2011. Its retracement zone at 1.1861 to 1.1826 was the first downside target. This zone was hit on Wednesday and is currently being tested. Since the main trend is up, we could see a technical bounce on a successful test of this zone.

The main retracement zone target is 1.1691 to 1.1616. This zone is controlling the near-term direction of the EUR/USD.


Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the EUR/USD on Thursday is likely to be determined by trader reaction to the short-term Fibonacci level at 1.1826.

Bullish Scenario

A sustained move over 1.1826 will indicate the presence of buyers. The first upside target is the 50% level at 1.1861.

Overcoming 1.1861 will indicate the buying is getting stronger. This could trigger a rally into a minor 50% level, currently estimated at 1.1918. This level will change if the Euro extends its current break through 1.1825.

Bearish Scenario

A sustained move under 1.1826 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into 1.1762, followed by the main bottom at 1.1754.

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

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