Based on the early price action, the direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the 50% level at 1.1345.
The Euro is trading sharply lower on Friday in reaction to weaker-than-expected economic data from the Euro Zone. Earlier today, a series of Purchasing Manager Index (PMI) reports showed Euro Zone business growth slowed much faster than expected this month.
The German PMI was particularly disappointing. It showed German private-sector growth slowed to its lowest level in nearly four years as factories in Europe’s largest economy churned out goods at a slower pace.
Thu Lan Nguyen, a Frankfurt-based strategist at Commerzbank said, “The economy in the Euro Zone has cooled significantly over the past months and unless this is just a brief interlude the European Central Bank might be forced to stick to an expansionary monetary policy.” This is potentially bearish because it will likely delay an ECB rate hike, which some expected to begin during the second half of 2019.
At 1156 GMT, the EUR/USD is trading 1.1350, down 0.0053 or -0.46%.
The main trend is down according to the daily swing chart. A trade through 1.1474 will change the main trend to up. A move through 1.1216 will signal a resumption of the downtrend.
Today’s sell-off also confirmed Tuesday’s closing price reversal top.
On the upside, the nearest resistance is a long-term 50% level at 1.1447.
The short-term range is 1.1216 to 1.1474. Its retracement zone at 1.1345 to 1.1315 is currently being tested. This zone is critical to the chart pattern.
Aggressive counter-trend buyers may come in on the first test of 1.1345 to 1.1315 in an effort to form a secondary higher bottom. A failure at 1.1315 could trigger a steep break.
Based on the early price action, the direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the 50% level at 1.1345.
A bullish scenario could develop the rest of the session if 1.1345 holds as support. This will indicate that aggressive counter-trend buyers are coming in to defend the 50% to 61.8% zone at 1.1345 to 1.1315.
If this creates enough upside momentum then look for a test of the downtrending Gann angle at 1.1381. Overcoming this level could drive the EUR/USD into an uptrending Gann angle at 1.1396. Overtaking this angle will indicate the buying is getting stronger.
A sustained move under 1.1345 will signal the presence of sellers. This could trigger a plunge into the Fibonacci level at 1.1315, followed closely by an uptrending Gann angle at 1.1306.
Look for a potential acceleration to the downside if 1.1306 fails as support. The next target angle comes in at 1.1261. This is the last potential support angle before the 1.1216 main bottom.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.