The EUR/USD is trading higher on Tuesday, shortly ahead of the U.S. opening. The market is being supported by increased demand for higher risk assets.
Yesterday’s rally, which confirmed Friday’s closing price reversal bottom, was aided by upbeat comments from European Central Bank President Mario Draghi.
Daily Technical Analysis
The main trend is down according to the daily swing chart. However, momentum shifted to the upside on April 6. A trade through 1.2214 will negate the chart pattern and signal a resumption of the downtrend.
The short-term range is 1.2476 to 1.2214. Its retracement zone is 1.2346 to 1.2376.
The longer-term retracement zone is 1.2354 to 1.2401. Combining the two retracement zones makes 1.2346 to 1.2354 an important resistance cluster. Since the main trend is down, sellers may come in on the first test of this area. Overtaking this zone will extend the short-covering rally.
On the downside, retracement zone support is 1.2235.
Daily Technical Forecast
Based on the early trade, the direction of the EUR/USD is likely to be determined by trader reaction to the steep uptrending Gann angle at 1.2294.
A sustained move over 1.2294 will signal the presence of buyers. If this move generates enough upside momentum then look for a possible extension of the rally into 1.2346 then 1.2354. The latter is a potential trigger point for a rally into a resistance cluster at 1.2376. Look for sellers on the first test of this resistance cluster.
A sustained move under 1.2294 will indicate the presence of sellers. Taking out the longer-term uptrending Gann angle at 1.2293 will indicate the selling is getting stronger. This could trigger an even steeper break into the next uptrending Gann angle at 1.2254.