EUR/USD: Main Trend Up, Minor Down Indicates Volatility

The Euro is trading slightly lower on Friday in a volatile session, bouncing back from earlier weakness after a report showed Euro Zone business growth unexpectedly accelerated this month. The growth spurt was fueled by the bloc’s dominant services sector after it showed a sharp increase in activity as consumers shrugged off soaring prices, a survey showed.

At 12:14 GMT, the EUR/USD is trading 1.0821, down 0.0011 or -0.10%, up from an intraday low of 1.0790. On Thursday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $100.36, down $0.22 or -0.22%.

Whip-Saw Trading

The EUR/USD posted a wicked two-sided trade on Thursday after a European Central Bank (ECB) official issued a hawkish statement, only to be followed-up by more hawkish comments from the highest ranking Fed policymaker.

ECB vice-president Luis de Guindos said in an interview the European Central Bank (ECB) should end its stimulus program in July and could raise interest rates that same month, in September, or later. This news spiked the EUR/USD higher.

Just a short while later, Fed Chair Jerome Powell offered further signposting of aggressive interest rate hikes this year, reversing the EUR/USD down.

A half-point interest rate increase will be “on the table” when the U.S. central bank meets on May 3-4 to approve the next in what is expected to be a series of rate increases this year, Powell said.

With inflation running roughly three times the Fed’s 2% target, “it is appropriate to be moving a little more quickly,” Powell added in a discussion of the global economy at the meetings of the International Monetary Fund (IMF).

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending higher. A trade through 1.1185 will change the main trend to up, while a move through 1.0758 will signal a resumption of the downtrend.

The minor trend is up. It changed to up on Thursday when buyers took out minor tops at 1.0923 and 1.0933. This shifted momentum to the upside.

The minor range is 1.0758 to 1.0936. The EUR/USD is currently trading on the weak side of its pivot at 1.0847, making it resistance.

The short-term range is 1.1185 to 1.0758. Its pivot at 1.0972 is additional resistance.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at 1.0847 is likely to determine the direction of the EUR/USD on Friday.

Bearish Scenario

A sustained move under 1.0847 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the main bottom at 1.0758. Taking out this level could trigger an acceleration to the downside with 1.0636 the next major target.

Bullish Scenario

A sustained move over 1.0847 will signal the presence of buyers. This move could drive the EUR/USD into the minor top at 1.0936, followed by the second pivot at 1.0972.

Taking out 1.0972 could trigger an acceleration into a key 50% level at 1.1074.