EUR/USD Reaction to 1.1377 Pivot Sets the Early Tone

The Euro is edging lower against the U.S. Dollar early Tuesday after declining the previous session as investors continued to demand greenbacks despite chatter that the Federal Reserve tightening plans were largely priced in. On Friday, the single-currency hit a two-month high.

At 05:32 GMT, the EUR/USD is trading 1.1397, down 0.0009 or -0.07%. On Friday, the Invesco CurrencyShares Euro Trust settled at $106.08, down $0.34 or -0.32%.

With no major economic data for the Euro Zone on the calendar this week, investors will focus on speeches from President Christine Lagarde, other European Central Bank (ECB) members and the minutes of the ECB’s December policy meeting out on Thursday.

ECB President Christine Lagarde said on Friday, the bank is ready to take any measures necessary to get inflation down to its 2% target. Inflation rose to 5% last month, the highest on record for the 19-counry currency bloc.

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 Friday.

A trade through 1.1483 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 1.1272 will change the main trend to down.

The minor range is 1.1272 to 1.1483. Its 50% level at 1.1377 is the next downside target and potential support.

The short-term range is 1.1186 to 1.1483. Its retracement zone at 1.1335 to 1.1300 is another potential target and the best value area.

The main range is 1.1692 to 1.1186. Its retracement zone at 1.1439 to 1.1499 is resistance. This zone stopped the rally on Friday at 1.1483.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Tuesday is likely to be determined by trader reaction to the pivot at 1.1377.

Bullish Scenario

A sustained move over 1.1377 will indicate the presence of buyers. If this move creates enough upside momentum then look for a retest of the main retracement zone at 1.1439 to 1.1499.

Bearish Scenario

A sustained move under 1.1377 will signal the presence of sellers. This could trigger a break into the short-term retracement zone at 1.1335 to 1.1300. Since the main trend is up, buyers could come in on a test of this area. This is the last major support before the multi-year low at 1.1186.