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James Hyerczyk

The Euro is trading slightly higher against the U.S. Dollar on Tuesday, helped by a better-than-expected German economic sentiment survey. However, gains are being limited because traders doubt the news will change the rhetoric of the European Central Bank.

“The message from the ECB is unlikely to change much,” while the Fed could cut rates next year, which means markets’ focus is likely to stay on the Fed, said Richard Falkenhall, senior currency strategist at SEB.

“It’s too early to expect any major change when it comes to ECB communication,” he said.

At 13:03 GMT, the EUR/USD is trading 1.1076, up 0.0012 or +0.11%.

Investors are almost certain the Fed will leave rates unchanged when its two-day meeting ends on Wednesday. In a year’s time, however, money makers are pricing in a full 25-basis point cut.

The ECB is likewise expected to keep interest rates steady on Thursday. A probability of less than 50% for a 10-basis-point rate cut by the end of next year is priced into the Euro Zone money markets right now.


Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.1116 will signal a resumption of the uptrend. The main trend will change to down on a move through 1.0981.

The main range is 1.0879 to 1.1179. Its retracement zone at 1.1029 to 1.0994 is support.

The short-term range is 1.1176 to 1.0981. Its retracement zone at 1.1079 to 1.1102 is potential resistance.


Daily Technical Forecast

Based on the early price action and the current price at 1.1076, the direction of the EUR/USD the rest of the session on Tuesday is likely to be determined by trader reaction to the short-term 50% level at 1.1079.

Bullish Scenario

A sustained move over 1.1079 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the short-term Fibonacci level at 1.1102, followed closely by the downtrending Gann angle at 1.1106.

Bearish Scenario

A sustained move under 1.1079 will signal the presence of sellers. This could drive the EUR/USD into an uptrending Gann angle at 1.1051. Look for a technical bounce on the first test of this angle. If it fails as support then look for an acceleration into the main 50% level at 1.1029, followed closely by an uptrending Gann angle at 1.1016.

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