EUR/USD Forex Technical Analysis – Whip-Saw Rebound Puts Euro in Position to Change Main Trend to Up

The Euro is trading nearly flat shortly after the mid-session on Friday after recovering from an earlier steep loss.

Earlier in the session, the single-currency plunged after data showed businesses across the Euro Zone continued to report mounting inflation pressures and an acceleration in wage growth, even as the overall growth outlook becomes increasingly murky, the European Central Bank said, based on a survey of 71 major firms.

Euro Zone business activity unexpectedly contracted this month due to an accelerating downturn in manufacturing and a near-stalling of service sector growth as burgeoning costs pushed consumer to cut back on expenditure, a survey showed.

S&P Global’s flash Composite Purchasing Managers’ Index (PMI), seen as a good gauge of overall economic health, fell to 49.4 in July from 52.0 in June, well below all forecasts in a Reuters poll that had predicted a more modest dip to 51.0.

At 17:53 GMT, the EUR/USD is trading 1.0235, up 0.0006 or +0.06%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $94.21, down $0.15 or -0.16%.

The EUR/USD recovered enough from the earlier steep sell-off to break-even on the day after data showed U.S. business activity contracted for the first time in nearly two years in July as a sharp slowdown in the service sector outweighed continued modest growth in manufacturing.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through 1.0278 will change the main trend to up. A move through .9952 will signal a resumption of the downtrend.

The minor range is .9952 to 1.0278. Its retracement zone at 1.0113 to 1.0075 is the nearest support.

The short-range is 1.0615 to .9952. Its 50% level at 1.0284 is the nearest resistance.

The intermediate range is 1.0774 to .9952. Its retracement zone at 1.0363 to 1.0460 is the last potential resistance before the 1.0615 main top.

Short-Term Outlook

Trader reaction to 1.0204 is likely to determine the direction of the EUR/USD into the close on Friday.

Bullish Scenario

A sustained move over 1.0204 will indicate the presence of buyers. This could trigger a late session surge into the resistance cluster at 1.0278 to 1.0284.

Taking out 1.0278 will change the main trend to up, while a move through 1.0284 could trigger an acceleration into the intermediate 50% level at 1.0363.

Bearish Scenario

A sustained move under 1.0294 will signal the presence of sellers. If this creates enough downside momentum then look for a potential break into the minor resistance zone at 1.0113 to 1.0075.