EUR/USD Mid-Session Technical Analysis for May 5, 2020

The Euro is trading sharply lower against the U.S. Dollar on Tuesday after a German constitutional court ruled that the Bundesbank must stop buying government bonds if the European Central Bank cannot prove those purchases are needed.

The decision did not apply to the ECB’s latest pandemic-fighting program, a 750 billion Euro scheme to prop up the economy, but the ruling unsettled financial markets, which had been calmed by aggressive ECB asset purchases to prevent the coronavirus crisis leading to an economic meltdown.

The EUR/USD is trading 1.0833, down 0.0067 or -0.62%.

Also hurting the Euro was the presence of a large long position in the single currency which has intensified the selling pressure. Latest positioning data showed bullish Euro bets were at their biggest level in nearly two years.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.1018 will signal a resumption of the uptrend. The main trend will change to down on a move through the last swing bottom at 1.0727.

The minor trend is also up. A trade through 1.0810 will change the minor trend to down. This will also shift momentum to the downside.

The short-term range is 1.1147 to 1.0727. Its retracement zone at 1.0937 to 1.0987 is resistance.

The intermediate range is 1.0636 to 1.1147. Its retracement zone at 1.0892 to 1.0831 is currently being tested.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 1.0833, the direction of the EUR/USD the rest of the session on Tuesday is likely to be determined by trader reaction to the Fibonacci level at 1.0831.

Bearish Scenario

A sustained move under 1.0831 will indicate the presence of sellers. This could lead to a quick test of the minor bottom at 1.0810. This could trigger an acceleration into the main bottom at 1.0727.

Bullish Scenario

Holding 1.0831 will indicate the selling is getting weaker. This could trigger a short-covering rally into the 50% level at 1.0892.