EUR/USD Mid-Session Technical Analysis for May 7, 2020

The Euro dipped to its lowest level in almost two weeks against the U.S. Dollar on Thursday, on nagging concern over the direction of the European Central Bank’s (ECB) stimulus scheme following a German court ruling earlier this week. It has shed more than 1.5% this week and is set for its biggest weekly drop in just over a month.

At 12:27 GMT, the EUR/USD is trading 1.0781, down 0.0016 or -0.15%.

The single-currency has been hit hard since Tuesday’s ruling from Germany’s highest court that gave the ECB three months to justify purchases under its bond-buying programme or lose the Bundesbank’s participation in one of its main stimulus schemes.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum is trending lower. A trade through 1.0727 will change the main trend to down. A move through 1.1018 will signal a resumption of the uptrend.

The minor trend is down. This helped shift momentum to the downside.

The main range is 1.0636 to 1.1147. Its retracement zone at 1.0831 to 1.0892 is resistance. The zone is controlling the near-term direction of the Forex pair.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the EUR/USD is likely to be determined by trader reaction to the main Fibonacci level at 1.0831.

Bearish Scenario

A sustained move under 1.0831 will indicate the presence of sellers. If this continues to generate enough downside momentum then look for an eventual test of the April 24 bottom at 1.0727.

Bullish Scenario

Overcoming 1.0831 will signal the presence of buyers. This will also put the EUR/USD in a position to form a closing price reversal bottom. This won’t change the main trend to up, but if confirmed, it could trigger the start of a 2 to 3 rally.

Side Notes

Even though the swing chart indicates the main trend is up, the EUR/USD is going to have a hard time rallying if buyers can’t overcome the 1.0892 to 1.0831 retracement zone.