EUR/USD Mid-Session Technical Analysis for December 10, 2021

The Euro is trading lower on Friday ahead of a critical U.S. inflation reading that will set the tone ahead of a flurry of central bank meetings next week.

A Reuters poll expects the U.S. consumer price index (CPI) to show U.S. consumer prices rose another 6.8% year-on-year in November, up from 6.2% in October.

Breaking News:  Inflation surged 6.8%, even more than expected, in November to fastest rate since 1982.

At 13:16 GMT, the EUR/USD is trading 1.1275, down 0.0018 or -0.16%. On Thursday, the Invesco CurrencyShares Euro Trust (FXE) ETF settled at $105.05, down $0.48 or -0.46%.

At the Fed’s meeting next week, investors will watch whether the bank accelerates the tapering of its bond purchases and for any changes in its rate hike projections.

“The comments from Fed Chairman Powell that inflation may not be as transitory as the Federal Reserve thought highlight the risk ahead of the FOMC meeting next week,” said Jens Peter Sorensen, chief analyst at Danske Bank.

The EUR/USD has been under pressure this week after a Reuters report showed that European Central Bank policymakers are homing in on a temporary increase of the bank’s conventional bond purchases after a much larger pandemic-fighting scheme ends in March.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending higher. A trade through 1.1186 will signal a resumption of the downtrend. A move through 1.1608 will change the main trend to up.

The minor trend is up. This is controlling the momentum. A trade through the minor tops at 1.1355 and 1.1383 will reaffirm the minor trend. A move through 1.1228 will change the minor trend to down.

The EUR/USD is trading on the weak side of its long-term Fibonacci level at 1.1291, making it resistance.

On the upside, the nearest resistance is a pair of 50% levels at 1.1397 and 1.1439.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Friday is likely to be determined by trader reaction to 1.1291.

Bearish Scenario

A sustained move under 1.1291 will indicate the presence of sellers. If this creates enough downside momentum then look for a break into 1.1228.

Taking out 1.1228 will indicate the selling pressure is getting stronger. This could trigger a further break into the 1.1186 main bottom, followed by the June 19, 2020 main bottom at 1.1168.

Bullish Scenario

A sustained move over 1.1291 will signal the presence of buyers. If this generates enough upside momentum then look for the rally to possibly extend into the minor tops at 1.1355 and 1.1383.

We could start to see a strong upside bias develop on a sustained move over 1.1397.