EUR/USD Testing Key Retracement Zone at to 1.1407 – 1.1474

The Euro is edging lower on Monday after soaring last week following a hawkish shift by the European Central Bank (ECB). Traders were also moving money back into the U.S. Dollar, betting the jump in U.S. jobs created in January could lead to faster Federal Reserve rate hikes.

At 13:27 GMT, the EUR/USD is trading 1.1439, down 0.0013 or -0.11%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $106.41, up $0.25 or +0.23%.

The European common currency hit a three-week high last week. Those gains had been driven by a hawkish turn from the ECB, which led traders to bring forward the likely timing of Euro rate hikes and sent bond yields sharply higher.

The dollar found some support on Monday, helped by U.S. Treasury yields that rose after far better-than-expected jobs data on Friday. The financial markets have now priced in a one-in-three chance the Fed might hike by a full 50 basis points in March, and a reasonable chance rates will reach 1.5% by year end.

These expectations could be bolstered by the U.S. consumer price index due Thursday.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum has been trending higher since the formation of the closing price reversal bottom on January 28.

A trade through 1.1483 will change the main trend to up. A move through 1.1122 will signal a resumption of the downtrend.

The short-term range is 1.1692 to 1.1122. The EUR/USD is currently trading inside its retracement zone at 1.1407 to 1.1474.

The main range is 1.1909 to 1.1122. Its retracement zone at 1.1516 to 1.1609 is the next upside target area and potential resistance.

The new minor range is 1.1122 to 1.1483. Its retracement zone at 1.1303 to 1.1260 is the nearest downside target and potential support.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Monday is likely to be determined by trader reaction to 1.1448.

Bullish Scenario

A sustained move over 1.1448 will indicate the presence of buyers. This could lead to a labored rally with the first target a Fibonacci level at 1.1474, followed by a main top at 1.1483. Taking out this level will change the main trend to up and could trigger a fast surge into a 50% level at 1.1516. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 1.1448 will signal the presence of sellers. The first downside target is a 50% level at 1.1407. This is a potential trigger point for an acceleration to the downside with the next major target zone coming in at 1.1303 to 1.1260.