EUR/USD Mid-Session Technical Analysis for February 4, 2021

The Euro fell to its lowest level against the U.S. Dollar since December 1 on Thursday, after data pointed to an improvement in the U.S. economic outlook, while risk appetite in global stock markets eased off. Bullish comments from U.S. Federal Reserve policymakers and renewed hopes for U.S. fiscal stimulus are also lending new impetus to reflation trades.

Additionally, the Democratic-controlled U.S. House of Representatives approved a budget outline on Wednesday that would allow them to pass President Joe Biden’s proposed $1.9 trillion coronavirus aid plan without Republican support.

At 13:11 GMT, the EUR/USD is trading 1.1996, down 0.0040 or -0.33%.

In other news, Euro Zone retail sales rebounded more than expected in December as Christmas shopping for clothes and shoes caused a surge in sales compared to November, with France and Belgium recording double-digit monthly jumps, data showed on Thursday.

The European Union’s statistics office Eurostat said retail sales in the 19 countries sharing the Euro rose 2.0% month-on-month in December, beating consensus forecasts in a Reuters poll of a 1.6% increase.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at 1.1983 will signal a resumption of the downtrend.

The main trend changes to up on a move through 1.2190. This is highly unlikely, but the EUR/USD is down nine days from its last main top, which puts it in the window of time for a potentially bullish closing price reversal bottom.

This chart pattern will not signal a change in trend, but if confirmed, it could trigger a two to three day counter-trend rally. At current price levels, it may be necessary to alleviate some of the downside pressure before leading to the start of another leg lower.

The main range is 1.1800 to 1.2349. The EUR/USD is currently trading on the weak side of its retracement zone at 1.2010 to 1.2074. This zone is controlling the near-term direction of the Forex pair.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD is likely to be determined by trader reaction to the Fibonacci level at 1.2010.

Bearish Scenario

A sustained move under 1.2010 will indicate the presence of sellers. This could trigger an eventual break into the November 23 main bottom at 1.1800.

Bullish Scenario

Overcoming 1.2010 will signal the return of buyers, but overtaking 1.2035 will put the EUR/USD in a position to form a potentially bullish closing price reversal bottom. This could lead to a test of the 50% level at 1.2074.