EUR/USD Mid-Session Technical Analysis for November 25, 2021
The Euro is edging higher against the U.S. Dollar at the mid-session on Thursday as the greenback weakened overnight. Nonetheless, the common currency remained close to its lowest level since July 2020 after U.S. Federal Reserve meeting minutes reinforced market expectations that the Fed will raise rates sooner than other major central banks. Volume is well-below average as U.S. traders were out for the Thanksgiving holiday.
At 16:11 GMT, the EUR/USD is trading 1.1213, up 0.0014 or +0.12%.
Minutes from the November 2-3 meeting indicated the Fed had become more concerned about rising inflation as various policymakers said they would be open to speeding up the taper of their bond-buying program if high inflation held and move more quickly to raise interest rates.
Meanwhile, the Euro, which has lost nearly 3% so far this month against the dollar, remains weighed down by expectations that the European Central Bank (ECB) will remain more dovish than the Fed and a new wave of COVID-19 restrictions in Europe.
Simply stated, the combination of a hawkish Fed and a fourth wave in Europe is making the U.S. Dollar a more attractive currency.
Traders should keep in mind that there is the risk of a short-squeeze if the EUR/USD continues to collapse. It may not be fueled by any change in the fundamentals, but by technical buying designed to alleviate some of the downside pressure.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through 1.1186 will signal a resumption of the downtrend. A move through the June 18, 2020 main bottom at 1.1168 will reaffirm the downtrend.
A trade through 1.1608 will change the main trend to up. This is highly unlikely, but due to the prolonged move down in terms of price and time, the EUR/USD is currently inside the window of time for a closing price reversal bottom. This chart pattern won’t change the main trend to up, but if confirmed, it could trigger the start of a 2 to 3 counter-trend rally.
Traders should keep an eye on the price action and order flow on a test of 1.1168.
Aggressive counter-trend buyers may step in to defend this level and could even produce a potentially bullish closing price reversal bottom. If the reaction is strong, we may even see the start of a short-squeeze.
In addition to being an attractive level for counter-trend bulls, 1.1168 is also a potential trigger point for an acceleration to the downside.
If heavy selling pressure comes in on a breakdown under 1.1168, it may launch another steep break with 1.0871 the primary downside target.