James Hyerczyk
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The Euro is trading lower on Monday after giving up earlier gains. The move comes as a surprise to some because earlier in the session, a few Euro Zone reports showed factory activity growing faster in February.

The Euro likely fell despite the good news because the reports are likely to fuel the notion that the Euro Zone economy is heating up pretty fast and it may force the European Central Bank to alter monetary policy sooner than expected.

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At 12:38 GMT, the EUR/USD is trading 1.2042, down 0.0031 or -0.25%.

Pressure has been growing on the European Central Bank to act against rising yields in the Euro Zone. Therefore, traders focus has shifted to a speech later this afternoon by President Christine Lagarde.

“There is little doubt in my mind that central banks will eventually lean quite hard against a sustained rise in yields. They simply can’t afford to see it happen with debt so high,” Deutsche Bank strategist Jim Reid told his clients in a morning note.

There is a deepening divide between traders and central banks over the pace of the economic recovery. The central banks have their credibility on the line so they will do what they have do to maintain their current accommodative polices because they believe their economies are going to continue to need help. Higher yields make all their policy moves too expensive to implement.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum is trending lower. A trade through 1.1952 will change the main trend to down. A move through 1.2243 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the momentum. A trade through 1.2023 will indicate the selling pressure is getting stronger.

The short-term retracement zone at 1.2074 to 1.2010 is currently being tested. If this zone fails as support, we could see the start of a steep decline.

The minor range is 1.2349 to 1.1952. Its retracement zone at 1.2151 to 1.2197 is resistance.


Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Monday is likely to be determined by trader reaction to the 50% level at 1.2074.

Bearish Scenario

A sustained move under 1.2074 will indicate the presence of sellers. This could trigger a break into the minor bottom at 1.2023, followed by the Fibonacci level at 1.2010. This level is a potential trigger point for an acceleration into the main bottom at 1.1952.

Bullish Scenario

A sustained move over 1.2074 will signal the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the minor retracement zone at 1.2151 to 1.2197.

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