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James Hyerczyk

The Euro is trading lower against the U.S. Dollar on Monday in a holiday-thinned trade as traders shifted their focus to the European Central Bank’s meeting on Thursday. The ECB meeting comes after the Euro marked a two-year high at the beginning of the month.

As far as the ECB is concerned, traders don’t expect a change in policy but are focusing on the message policymakers deliver on their inflation forecasts especially since a report showed last week that Euro Zone inflation had turned negative.

Last week, the Euro was pressured after board member Philip Lane said that the appreciation of the Euro “does matter” for monetary policy, highlighting the potential for further easing from the bank.

At 10:46 GMT, the EUR/USD is trading 1.1820, down 0.0020 or -0.17%.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on September 1.

The main trend will change to down on a trade through 1.1754. A move through 1.2011 will negate the closing price reversal top and signal a resumption of the uptrend.

The short-term range is 1.1711 to 1.2011. Its retracement zone at 1.1861 to 1.1826 is controlling the near-term direction of the EUR/USD.

The minor range is 1.2011 to 1.1781. Its 50% level at 1.1896 is a potential upside target.

The main support is the retracement zone at 1.1691 to 1.1616.


Short-Term Outlook

Based on the recent price action and today’s move, the direction of the EUR/USD the rest of the session on Monday is likely to be determined by trader reaction to the short-term Fibonacci level at 1.1826.

Bearish Scenario

A sustained move under 1.1826 will indicate the presence of sellers. The first downside target is 1.1781. Taking out this level will indicate the selling pressure is getting stronger. This could trigger a further break into the main bottom at 1.1754. A trade through this level will change the main trend to down.

Bullish Scenario

A sustained move over 1.1826 will signal the presence of buyers. This could trigger a labored rally with potential upside targets at 1.1861 and 1.1896.

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