EUR/USD Setting Up for Potentially Bullish Reversal Bottom

The Euro is trading nearly flat after touching its lowest level since March 8 earlier in the session. The single-currency has been under pressure since meeting minutes released Wednesday afternoon showed the Federal Reserve preparing to move aggressively to fight inflation.

Minutes from the March Fed meeting published on Wednesday showed “many” participants were prepared to raise interest rates in 50-basis –point increments in coming months.

At 11:37 GMT, the EUR/USD is trading 1.0906, up 0.0010 or +0.09%. This is up from an intraday low of 1.0865. On Wednesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $101.05, up $0.02 or +0.02%.

The Fed also revealed that it was preparing for a reduction in its balance sheet after the May meeting at a rate of $95 billion per month, the beginning of the reversal of the massive stimulus it pumped into the economy after the COVID-19 pandemic.

In other news, minutes from the ECB’s March meeting were released at 11:30 GMT. Traders were hoping to gain some insight into policymakers’ delicate balancing act to manage soaring inflation and slowing growth.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at 1.0865 will signal a resumption of the downtrend.

A move through the main top at 1.1185 will change the trend to up. This is highly unlikely, but due to the steep five-day break, it may be ripe for a short-term reversal.

The nearest resistance is a 50% level at 1.0972. The minor range is 1.1185 to 1.0865. Its 50% level at 1.1025 is another potential target.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Thursday is likely to be determined by trader reaction to 1.0897.

Bullish Scenario

A sustained move over 1.0897 will indicate the presence of buyers. Taking out the intraday high at 1.0934 will indicate the buying is getting stronger. This could create the upside momentum needed to challenge the first 50% level at 1.0972.

Bearish Scenario

A sustained move under 1.0897 will signal the presence of sellers. If this generates enough downside momentum then look for a retest of the intraday low at 1.0865. Taking out this level could spike prices into the March 7 main bottom at 1.0806.

Side Notes

A close over 1.0897 will form a potentially bullish closing price reversal bottom. If confirmed, this could trigger the start of a 2 to 3 day counter-trend retracement.