EUR/USD Mid-Session Technical Analysis for December 16, 2021

The Euro is trading flat against the U.S. Dollar ahead of European Central Bank (ECB) monetary policy decisions, a day after the U.S. Federal Reserve unveiled its highly anticipated tightening plans.

The single-currency showed little reaction to the Fed’s decision on Wednesday to end its pandemic-era bond buying in March and three interest rate hikes in 2022 because investors had been anticipated the moves for weeks.

At 11:56 GMT, the EUR/USD is trading 1.1292, down 0.0002 or -0.02%. On Wednesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $104.91, up $0.27 or +0.26%.

We’re not expecting much from the ECB today, but if policymakers even hint at monetary policy tightening, we expect the Euro to strengthen. There is some speculation ahead of the meeting that the ECB will announce the end of the bank’s pandemic bond-buying programme at the end of 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 1.1383 will change the main trend to up. A move through the new main bottom at 1.1222 will signal a resumption of the downtrend.

The minor trend is up according to the daily swing chart. This is controlling the momentum. Taking out the minor tops at 1.1324 and 1.1355 will indicate the buying is getting stronger.

The EUR/USD is currently trading on the strong side of a long-term Fibonacci level at 1.1291, making it new support.

The nearest upside targets are a pair of 50% levels at 1.1397 and 1.1439.

Daily Swing Chart Technical Forecast

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

Bullish Scenario

A sustained move over 1.1291 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to extend into the minor tops at 1.1324 and 1.1355.

Taking out 1.1355 should trigger a surge into the main top at 1.1383, followed by the first pivot at 1.1397.

Bearish Scenario

A sustained move under 1.1291, will signal the presence of sellers. If this generates enough downside momentum then look for a near-term retest of 1.1222. Taking out this level could trigger a further break into the next main bottom at 1.1186 and the June 19, 2020 main bottom at 1.1168.