EUR/USD Mid-Session Technical Analysis for August 23, 2021

The Euro is trading higher against the U.S. Dollar on Monday as traders cover shorts after posting its biggest loss in more than two months last week with the selling fueled by concerns over the outlook for global growth.

Additionally, while the rise in the delta variant is likely to boost the safe-haven appeal of the U.S. Dollar, it might also derail the Fed’s plans to taper its pandemic-era stimulus plan by the end of the year. This could trigger further short-covering in the Euro.

At 11:11 GMT, the EUR/USD is trading 1.1724, up 0.0024 or +0.21%.

In other news, business activity in the Euro Zone grew strongly again this month, only dipping from July’s two-decade high monthly pace, as a rapid vaccination drive against the coronavirus allowed more firms to reopen and customers to venture out, a survey showed.

Without ongoing supply chain disruptions, activity could have expanded faster, but fears new coronavirus strains may lead to renewed restrictions continued to put a dent in optimism.

IHS Markit’s Flash Composite Purchasing Managers’ Index, seen as a good guide to economic health, fell to 59.5 in August from 60.2 last month. It was ahead of the 50-mark separating growth from contraction but just shy of a Reuters poll estimate for 59.7.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending higher, following the confirmation of Friday’s closing price reversal bottom.

A trade through 1.1664 will negate the closing price reversal bottom and signal a resumption of the downtrend. The main trend will change to up on a move through 1.1805.

The minor range is 1.1805 to 1.1664. Its retracement zone at 1.1735 to 1.1751 is the first upside target and potential resistance. Since the main trend is down, sellers are likely to come in on the first test of this area.

The short-term range is 1.1909 to 1.1664. Its 50% level at 1.1787 is the next potential upside target.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD into the close on Monday is likely to be determined by trader reaction to 1.1735.

Bearish Scenario

A sustained move under 1.1735 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into a minor pivot at 1.1698. If this fails then look for the move to possibly lead to a retest of 1.1664.

Bullish Scenario

A sustained move over 1.1735 will signal the presence of buyers. This could trigger a surge into 1.1751. Overtaking this level will indicate the buying is getting stronger. This could signal the start of an acceleration into the pivot at 1.1787.