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James Hyerczyk

The Euro is trading sharply lower on Friday in reaction to steady Euro Zone inflation data and robust U.S. housing data.

In Europe, a higher contribution from energy costs boosted Euro Zone inflation in December, data showed on Friday, as the EU’s statistics office confirmed its earlier estimate that consumer prices grew 1.3% year-on-year in the last month of 2019. Eurostat also confirmed its earlier estimate that month-on-month prices in the 19 countries sharing the Euro rose 0.3%.

The energy contribution to the year-on-year index changed from -0.33 percentage points in November to a positive 0.02 points in December, accounting for the difference between the November inflation rate of 1.0% and December’s 1.3%.

At 13:57 GMT, the EUR/USD is trading 1.1103, down 0.0033 or -0.30%.

In the U.S., homebuilding surged to a 13-year high in December as activity increased across the board. Housing starts jumped 16.9% to an annual rate of 1.608 million units last month, the highest level since 2006.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. Additionally, a secondary lower top has formed, indicating the selling pressure is increasing.

A trade through 1.1085 will change the main trend to down.

The minor trend is down. This is controlling the momentum. It turned down earlier in the session when sellers took out 1.1105. The new minor top is 1.1173.

The main range is 1.0981 to 1.1239. Its retracement zone at 1.1110 to 1.1080 is currently being tested. This zone is controlling the near-term direction of the Forex pair.

The short-term range is 1.1239 to 1.1085. Its retracement zone at 1.1162 to 1.1180 is resistance. This zone stopped the rally at 1.1173 on Thursday.


Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the EUR/USD the rest of the session on Friday is likely to be determined by trader reaction to the 50% level at 1.1110.

Bearish Scenario

A sustained move under 1.1110 will indicate the presence of sellers. The first downside target is the main bottom at 1.1085, followed closely by the main Fibonacci level at 1.1080. Taking out this level will likely lead to a test of the main bottom at 1.1067. This is a potential trigger point for an acceleration to the downside.

Bullish Scenario

A sustained move over 1.1110 will signal the return of buyers. This could trigger an intraday short-covering rally into at least 1.1135.

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