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James Hyerczyk

The Euro is inching higher against the U.S. Dollar on Wednesday after a report showed Euro Zone business activity expanded in March despite lockdowns. A slight dip in U.S. Treasury yields is also helping to underpin the common currency. Lower demand for riskier assets and caution ahead of today’s Federal Reserve meeting minutes may be putting a cap on gains.

At 13:28 GMT, the EUR/USD is trading 1.1885, up 0.0010 or +0.08%.

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Euro Zone business activity bounced back to growth last month, underpinned by a record expansion in manufacturing, according to a survey on Wednesday that also showed the service industry was coping better than expected with new lockdowns.

The IHS Markit’s Services Purchasing Managers’ Index (PMI) rose to 49.6 in March from February’s 45.7, much higher than a flash estimate of 48.8 and only just shy of the 50 mark that separates growth from contraction.

The Fed minutes will be released at 18:00 GMT. The Fed kept interest rates unchanged in March, but investors will be looking closely at the minutes for clues as to when the central bank might raise rates.

“The minutes could help explain how the Fed plans to communicate future policy decisions and shed light on how some policymakers could change their view on monetary policy if inflation and growth does accelerate as expected this summer,” said Neil Wilson, chief market analyst for Markets.com in London.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through 1.1989 will change the main trend to up. A move through 1.1704 will signal a resumption of the downtrend.

The minor trend is also up. This is controlling the upside momentum. A trade through 1.1738 will change the minor trend to down.

On the downside, a pair of 50% levels at 1.1847 and 1.1801 is support.

The main range is 1.2349 to 1.1704. The EUR/USD is currently testing its retracement zone at 1.1888 to 1.1976. This zone is controlling the near-term direction of the single-currency.


Daily Swing Chart Technical Forecast

The direction of the EUR/USD is likely to be determined by trader reaction to the main Fibonacci level at 1.1888.

Bullish Scenario

A sustained move over 1.1888 will indicate the presence of buyers. If this move can create enough upside momentum then look for the rally to possibly extend into the main 50% level at 1.1976, followed by a pair of tops at 1.1989 and 1.1990.

Bearish Scenario

A sustained move under 1.1888 will signal the presence of sellers. This could trigger a break into 1.1847, followed by 1.1801. Look for aggressive counter-trend buyers to come in on a test of 1.1801. They will be trying to form a potentially bullish secondary higher bottom.

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