EUR/USD Threatening to Take Out Retracement Zone Support

The Euro is trading lower on Monday after a report showed the Euro Zone economic recovery weakened this month. Sellers are also pressing the single-currency in anticipation of hawkish policy announcements from the Federal Reserve on Wednesday. Finally, worries over a conflict in the Ukraine are driving some investors into the safe-haven U.S. Dollar.

At 13:05 GMT, the EUR/USD is trading 1.1297, down 0.0046 or -0.41%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $105.40, up $0.37 or +0.35%.

The Euro Zone economic recovery weakened this month, despite an upturn in Germany where factories benefited from an easing in supply chain bottlenecks, as renewed restrictions put a dent in the bloc’s dominant services industry, a survey showed.

HIS Markit’s Flash Composite Purchasing Managers’ Index, seen as a good gauge of overall economic health, dropped to 52.4 in January from 53.3 in December, its lowest since February and below the 52.6 predicted in a Reuters poll.

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 January 14.

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

The short-term range is 1.1186 to 1.1483. The EUR/USD is currently testing the lower end of its retracement zone at 1.1335 to 1.1300.

The minor range is 1.1483 to 1.1296. Its 50% level at 1.1390 is the nearest resistance.

The main range is 1.1692 to 1.1186. Its retracement zone at 1.1439 to 1.1499 is the key resistance. It stopped a rally at 1.1483 on January 14.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Monday is likely to be determined by trader reaction to 1.1300.

Bearish Scenario

A sustained move under 1.1300 will indicate the presence of sellers. The first target is the main bottom at 1.1272.

Taking out 1.1272 will change the main trend to down. This could trigger a sharp break into a pair of main bottoms at 1.1235 and 1.1222.

Bullish Scenario

A sustained move over 1.1300 will signal the presence of buyers. The first upside target is 1.1335. Taking out this level could trigger an acceleration into the minor pivot at 1.1390.