James Hyerczyk
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The Euro is trading higher against the U.S. Dollar on Tuesday in what looks to be short-covering rally and end-of-the-month position-squaring. European Central Bank policymakers are increasingly divided over how to steer Europe’s economy through a second wave of COVID-19 infections so it’s hard to build a bullish case for the single-currency at this time.

At 13:28 GMT, the EUR/USD is trading 1.1708, up 0.0042 or +0.36%.

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In other news, Euro Zone economic sentiment improved more than expected in September, data showed on Tuesday, mainly thanks to a rise in optimism in the services sector despite concerns about a second wave of the COVID-19 pandemic.

The European Commission’s monthly survey showed sentiment in the 19 countries sharing the Euro rising 91.1 points this month from 87.5 in August, beating market expectations of an improvement to 89.0 points.

Additionally, German Preliminary CPI came in lower than expected at -0.2%. Traders were looking for a reading of -0.1%. Spanish Flash CPI was -0.4%, matching expectations.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.1612 will signal a resumption of the downtrend. The main trend changes to up on a move through 1.1872.

The main range is 1.1371 to 1.2011. After consolidating inside its retracement zone at 1.1691 to 1.1616 for four sessions, the EUR/USD is showing signs of breaking out to the upside.

The minor range is 1.1872 to 1.1612. Its retracement zone at 1.1742 to 1.1773 is the next upside target. Since the main trend is down, sellers are likely to come in on a test of this area.


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 50% level at 1.1691.

Bullish Scenario

A sustained move over 1.1691 will indicate 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 1.1742 to 1.1773. Watch for sellers on the first test of this area.

Bearish Scenario

A sustained move under 1.1691 will signal the presence of sellers. This could trigger a pullback into 1.1663, followed by the main Fibonacci level at 1.1616.

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

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