James Hyerczyk
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The Euro is trading lower versus the U.S. Dollar at the mid-session on Wednesday after a report showed Euro Zone inflation slowed further year-on-year in May. The news came as no surprise as many thought inflation would remain low due to falling energy prices.

According to the European Union’s statistics office Eurostat, consumer prices in the 19 countries sharing the Euro fell by 0.1% month-on-month for a 0.1% year-on-year rise – as expected in a Reuters poll of economists – a deceleration from 0.3% year-on-year in April and 0.7% in March.

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At 15:32 GMT, the EUR/USD is at 1.1218, down 0.0044 or -0.39%.

Excluding the most volatile elements of energy and unprocessed food prices – what the European Central Bank calls core inflation – prices were flat month-on-month and rose 1.2% year-on-year in May, accelerating from 1.1% in April.

The ECB wants to keep the overall headline inflation below, but close to 2% over the medium term.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Wednesday when sellers took out 1.1213. A trade through 1.1422 will change the main trend to up.

The minor trend is also down. A trade through 1.1353 will change the minor trend to up. This will shift the momentum to the upside.

The minor trend is 1.1422 to 1.1208. Its 50% level or pivot at 1.1315 is potential resistance.

The main range is 1.1496 to 1.0636. Its retracement zone at 1.1167 to 1.1066 is controlling the longer-term direction of the EUR/USD. It is the next major downside target zone.


Daily Swing Chart Technical Forecast

Based on the current downside momentum, traders could drive the EUR/USD into the main Fibonacci level at 1.1167. We could see a technical bounce on the first test of this level, but if it fails, don’t be surprised by an acceleration to the downside with the main 50% level at 1.1066 the next likely downside target.

The resistance is 1.1315. Since the main trend is down, look for sellers to come in on the first test of this level. Overtaking this level will indicate the counter-trend buying is getting stronger.

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

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