EUR/USD Tumbles after Fed’s Bullard Delivers Hawkish Remarks

The Euro is trading lower late in the session on Monday as the U.S. Dollar rebounded from earlier weakness on the back of hawkish comments from a Federal Reserve official, who laid out the case for further rate hikes.

The single currency gained ground early in the session following a surprise drop in the U.S. Dollar as investors shunned the greenback in favor of the safe-haven Japanese Yen and Swiss Franc.

The early volatility was fueled as hundreds of demonstrators clashed in Shanghai on Sunday night as protests over China’s stringent COVID restrictions flared for a third day and spread to several cities in the wake of a deadly fire in the country’s far west.

At 19:42 GMT, the EUR/USD is trading 1.0340, down 0.0058 or -0.56%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $95.37, down $0.65 or -0.68%.

The EUR/USD began its sell-off after St. Louis Fed President James Bullard said that the U.S. central bank needs to raise interest rates quite a bit further and then hold them there throughout next year and into 2024 to gain control of inflation and bring it back down toward the Fed’s 2% goal.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but the late session pullback has put the EUR/USD in a position to form a potentially bearish closing price reversal top. This chart pattern will not change the trend to down, but if confirmed, it could trigger the start of a 2 to 3 day counter-trend break.

A move through 1.0497 will signal a resumption of the uptrend. A trade through .9730 will change the main trend to down.

The minor trend is down. It turned down on Monday, shifting momentum to the downside.

The nearest resistance is the long-term retracement zone at 1.0366 to 1.0560.

The nearest support is a pair of 50% levels at 1.0216 and 1.0076.

Daily Swing Chart Technical Forecast

Trader reaction to the 50% level at 1.0366 late in the session will determine the direction of the EUR/USD into the close on Monday.

A sustained move under 1.0366 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into 1.0223 – 1.0216.

A sustained move over 1.0366 will signal the return of buyers. The first upside target is a minor pivot at 1.0417. Overtaking this level could extend the move into the intraday high at 1.0497.