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James Hyerczyk

The Euro is trading lower on Friday, giving back some of its gains from yesterday’s surge into its highest level since November 7. Although the U.S. Federal Reserve raised its benchmark interest rate 25-basis points on Wednesday and projected at least two more rate hikes in 2019, the Euro strengthened against the U.S. Dollar because of a drop in U.S. Treasury yields. This move was fueled by investors betting on a weaker U.S. economy.

At 1157 GMT, the EUR/USD is trading 1.1421, down 0.0026 or -0.22%.

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Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on Friday when buyers took out the main top at 1.1444. It was reaffirmed when buyers took out the November 20 main top at 1.1474. However, the rally fell short of the November 7 top at 1.1501.

The main trend will change to down on a trade through 1.1270. However, we are seeing weakness today that suggests short-covering rather than new buying drove the market to a six-week high on Thursday. The evidence is the break below the two main tops at 1.1474 and 1.1444.

The EUR/USD is also trading back inside the major retracement zone at 1.1447 to 1.1185, signaling that the attempted breakout to the upside had failed.

The main range is 1.1501 to 1.1216. Its retracement zone at 1.1392 to 1.1359 is the primary downside target.

The short-term range is 1.1270 to 1.1487. Its 50% level at 1.1379 is another downside target. It falls inside the main retracement zone.


Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the EUR/USD is likely to be determined by trader reaction to the major 50% level at 1.1447.

Bullish Scenario

Overtaking and sustaining a rally over 1.1447 will indicate the return of buyers. If this can generate enough upside momentum then look for the rally to possibly extend into yesterday’s high at 1.1487, followed by the main top at 1.1501.

Bearish Scenario

A sustained move under 1.1447 will signal the presence of sellers. If the downside momentum continues then look for the selling to extend into the main Fibonacci level at 1.1392. The selling could become labored because of the short-term 50% level at 1.1379 and the main 50% level at 1.1359.

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