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James Hyerczyk

The Euro is trading higher on Wednesday, keeping it on pace for a seven-day winning streak. Earlier in the session, the single-currency reached its highest level since March 16. The rally is also being supported by a weaker U.S. Dollar, which continued to lose its luster as a safe-haven currency amid the prospects of more stimulus and hopes for economic recovery that is driving investors into riskier assets.

At 11:40 GMT, the EUR/USD is trading 1.1191, up 0.0023 or +0.21%.

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Overnight Euro implied volatility gauges jumped to 12%, their highest in one month, suggesting traders were preparing for moves bigger than usual in the common currency.

In other news, Euro Zone producer prices fell more than expected in April as the economy slowed to a crawl in the second month of containment measures against the coronavirus pandemic, but unemployment rose only slightly, defying more pessimistic forecasts, data showed.

The European Union’s statistics office Eurostat said prices at factory gates in the 19 Euro countries fell 2.0% month-on-month in April for a 4.5% year-on-year decline. Economists polled by Reuters had expected a 1.8% monthly and a 4.0% annual decline.

Euro Zone businesses also suffered another devastating contraction in activity in May and while there are signs the worst is over, it could be months before there is a return to growth, a survey showed on Wednesday.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier today when buyers took out yesterday’s high. The trend will change to down on a trade through the nearest swing bottom at 1.0871. However, the EUR/USD is up seven sessions from its last main bottom, which means we should start watching for a closing price reversal top.

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 common currency. This zone is also support.


Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 1.1191, the direction of the EUR/USD the rest of the session on Wednesday is likely to be determined by trader reaction to 1.1167.

Bullish Scenario

A sustained move over 1.1167 will indicate the presence of buyers. If this move generates enough upside momentum, we could see a breakout over the nearest minor top at 1.1237.

Bearish Scenario

A sustained move under 1.1167 will signal the presence of sellers. This will put the EUR/USD in a position to form a potentially bearish closing price reversal top. If confirmed, this could lead to a two to three day correction into at least 1.1066 to 1.1050.

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