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James Hyerczyk
EUR/USD

The Euro hit its highest level since early March on Tuesday after the European Union (EU) struck a deal for a massive stimulus plan to revive their coronavirus-hit economies, however, from a technical perspective, the price surge wasn’t that impressive. Furthermore, it’s starting to smell like a classic “buy the rumor, sell the fact” situation. After all, the news has been anticipated for weeks.

At 10:22 GMT, the EUR/USD is trading 1.1459, up 0.0011 or +0.10%.

Although European Union officials are hailing the agreement as an important sign of unity and a foundation for recovery, the price action suggests the gains were tempered by prior market expectations.

Furthermore, buyers seem to think the hard fought deal was merely a compromise between the thrifty northern states and the economically strapped southern states. Analysts also said that there was little new information in the final deal to spur the Euro much higher, with the breakdown between grants and loans already known.

What does it all mean? It suggests gains could be limited and the EUR/USD could be ripe for a near-term correction. It also likely means that the next movement in the single-currency will be determined by the recovery in the real economy and the resurgence of new COVID-19 cases.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. This was reaffirmed earlier today.

The main trend will change to down on a trade through 1.1185. This is highly unlikely. However, due to the prolonged move up in terms of price and time, the EUR/USD is ripe for a potentially bearish closing price reversal top.

If confirmed, this could lead to a minimum 2 to 3 day break or a 50% to 61.8% correction of the rally from 1.1185 to 1.1470.

The new minor range is 1.1255 to 1.1470. The first downside target is its 50% level at 1.1363. The next and more important support zone is 1.1327 to 1.1294.

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Daily Swing Chart Technical Forecast

Based on the current chart pattern, the direction of the EUR/USD on Tuesday is likely to be determined by trader reaction to yesterday’s close at 1.1448.

Bullish Scenario

A sustained move over 1.1448 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for a retest of the intraday high at 1.1470. Taking out this level could trigger a surge into 1.1496 to 1.1514.

Bearish Scenario

A sustained move under 1.1448 will signal the return of sellers. This will put the EUR/USD in a position to form a potentially bearish closing price reversal top. The first targets are a minor bottom at 1.1371 and a minor 50% level at 1.1363.

If 1.1363 fails then look for the selling to possibly extend into 1.1327 to 1.1294.

For a look at all of today’s economic events, check out our economic calendar.

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