EUR/USD Mid-Session Technical Analysis for May 2, 2018

The EUR/USD is trading slightly better shortly before the U.S. session opening. Don’t read too much into the price action. The move is likely being fueled by position-squaring ahead of the Fed’s interest rate decision and monetary policy statement at 1800 GMT.

The Fed is widely expected to leave rates unchanged at current price levels, but could offer hints as to further rate hikes later in the year. Investors expect the Fed to raise rates in June and once more after that. If the Fed stays the course then we could see a short-covering rally today. If the Fed hints at a fourth rate hike then the EUR/USD could break sharply.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The market is in no position to change the trend to up, but we could see a closing price reversal bottom. This could lead to a 2 to 3 day rally which would be designed to alleviate some of the downside pressure.

A trade through yesterday’s low at 1.1980 will signal a resumption of the downtrend. If this move attracts enough sellers to drive up the downside momentum, we could see a test of the next main bottom at 1.1717 over the near-term.

On the upside is a Fibonacci level at 1.2037 and a 50% level at 1.2136. Both levels should be considered resistance.

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 last year’s close at 1.2001.

A sustained move under 1.2001 will signal that the selling is getting stronger. We could see an acceleration to the downside under 1.1980 if sellers come in aggressively.

A sustained move over 1.2001 will indicate that buyers are coming in to defend last year’s close. However, don’t expect much of a short-covering rally unless buyers can overcome 1.2037.