EUR/USD Mid-Session Technical Analysis for May 8, 2018

The EUR/USD is under pressure early Tuesday as soft economic indicators continue to cast doubts on the European Central Bank’s ability to raise interest rates anytime soon. This is creating a divergence between the hawkish policy of the U.S. Federal Reserve and the dovish ECB which is helping to make the U.S. Dollar a more attractive investment.

Traders are holding the dollar near a four-month high despite worries over President Trump’s decision on whether to withdraw from the Iran nuclear deal. Trump will make his announcement at 1800 GMT. This could cause volatility in the Forex markets.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The EUR/USD is not in a position to change the trend to up, but it is in the window of time for a potentially bullish closing price reversal bottom. This could trigger a minimum 2 to 3 day counter-trend rally.

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 former bottom from January 9 at 1.1915. This level was first taken out on Monday and decisively earlier today.

A sustained move under 1.1915 will indicate the selling is getting stronger. The daily chart indicates there is plenty of room to the downside with potential near-term targets coming in at 1.1736 and 1.1717.

Regaining 1.1915 will signal the presence of buyers. Overtaking yesterday’s close will turn the EUR/USD higher, putting it in a position to form a potentially bullish closing price reversal bottom.

If a rally over 1.1915 gains traction, we could see an eventual move into last year’s close at 1.2001. This move would could shift sentiment to the upside.