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James Hyerczyk

The Euro is trading higher on Thursday with buyers taking back most of yesterday’s losses in reaction to renewed weakness in the U.S. equity markets.

In other news, the ECB’s economic bulletin reported that “the incoming information remains overall consistent with an ongoing economic expansion”, but also highlighted “increased downside risks” amid “uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial  market volatility”.

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The ECB continues to see the need for ongoing “significant monetary policy stimulus”, which suggests further measures to rollback monetary accommodation is not on the agenda.

At 1325 GMT, the EUR/USD is trading 1.1378, up 0.0024 or +2.1%.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been drifting lower since the trend changed on December 20. A trade through 1.1486 will signal a resumption of the uptrend. A move through 1.1270 will change the main trend to down.

Traders continue to be influenced by a major retracement that is controlling the near-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 controlling the price action. The short-term range is 1.1270 to 1.1486. Its 50% level at 1.1378 falls inside the main retracement zone.


Daily Swing Chart Technical Forecast

Based on the early price action, 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 signal the presence of buyers. If this move can generate enough upside momentum then we could see a surge into the major long-term 50% level at 1.1447.

Bearish Scenario

A sustained move under 1.1392 will indicate the presence of sellers. This could drive the Forex pair into the short-term 50% level at 1.1378, followed by the main 50% level at 1.1359.

If 1.1359 fails then look for a move into yesterday’s low at 1.1343. The daily chart indicates there is plenty of room to the downside under this level with the next major bottom coming in at 1.1270.

Basically, look for an upside bias to develop on a sustained move over 1.1392 and for a downside bias to develop on a sustained move under 1.1359.

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