EUR/USD Mid-Session Technical Analysis for December 29, 2021

The Euro is trading nearly flat against the U.S. Dollar on Wednesday in a choppy, low-volume trade. The price action indicates the absence of the major players – banks and institutions – who tend to give the common currency some stability.

There were no major reports out of the Euro Zone earlier in the session so the price action is likely being fueled by U.S. Treasury yields. Yields are currently edging higher after posting a small dip overnight.

At 13:35 GMT, the EUR/USD is trading 1.1311, up 0.0002 or +0.02%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $105.15, down $0.16 or -0.15%.

Fundamentally, investors continue to downplay the global surge in Omicron coronavirus variant infections, suggesting they believe it will have little impact of the economic recovery.

While the EUR/USD is expected to be tightly wound over the short-run, the longer-term outlook favors the downside on increased expectations for a sooner-than-expected rate hike by the Fed. So traders now think the Fed will make its first rate hike in March to combat high inflation.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.1344 will change the main trend to up, while a move through 1.1235 will signal a resumption of the downtrend.

The EUR/USD is currently trading on the bullish side of a longer-term Fibonacci level at 1.1291, making it intraday support.

On the upside, the nearest resistance level is 1.1397.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD into the close on Wednesday 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 can generate enough upside momentum in this low volume environment then look for the rally to possibly extend into 1.1344.

Taking out 1.1344 will change the main trend to up with the next targets a pair of main tops at 1.1360 and 1.1383, and a 50% level at 1.1397.

Bearish Scenario

A sustained move under 1.1291 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into a pair of main bottoms at 1.1235 and 1.1222.

Taking out 1.1222 will indicate the selling pressure is getting stronger with the next targets 1.1186 and 1.1168.