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James Hyerczyk

The Euro is trading higher against the U.S. Dollar with demand driven by concerns over the shutdown of the U.S. government. Buyers are also responding to a slight drop in U.S. Treasury yields. However, due to thin pre-holiday trading conditions, we have to take each move today with a grain of salt because the major banks are on the sidelines.

At 1300 GMT, the EUR/USD is trading 1.1407, up 0.0039 or +0.34%.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up last week when buyers took out 1.1444. The move was reaffirmed when the next swing top at 1.1474 was taken out, however, the buying stalled at 1.1487, just short of the main top at 1.1501.

The major long-term retracement zone is 1.1447 to 1.1185. The market has been trading inside this zone for over a month. Trader reaction to this zone will likely determine the longer-term direction of the Forex pair.

The main range is 1.1501 to 1.1216. Its retracement zone at 1.1359 to 1.1392 is also a major area to watch. The EUR/Usd has straddled this zone for over a month. Earlier today it found support inside this zone.


Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 1.1407, the direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the Fibonacci level at 1.1392.

Bullish Scenario

A sustained move over 1.1392 will indicate the presence of buyers. If this move gains traction over the next few days, we could see a surge into the 50% level at 1.1447. Overcoming this level will indicate the buying is getting stronger with the next upside targets last week’s high at 1.1487, followed by the main top at 1.1501.

Bearish Scenario

A sustained move under 1.1392 will signal the presence of sellers. This could lead to a labored break with targets coming in at 1.1379, 1.1359 and 1.1355.

We could see an acceleration to the downside if 1.1355 fails as support. The daily chart indicates there is plenty of room to break with 1.1270 the next major downside target.

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