EUR/USD Weakens Under 1.0972, Strengthens Over 1.1019

The Euro is trading lower early Tuesday in the wake of hawkish comments from U.S. Federal Reserve Chair Jerome Powell that opened the door for the central bank to take a more aggressive monetary policy path.

Further pressuring the single-currency were dovish comments from European Central Bank (ECB) President Christine Lagarde who said on Monday that the Fed and ECB will also move out of sync, as the war in Ukraine has very different impacts on their respective economies.

At 02:18 GMT, the EUR/USD is trading 1.0993, down 0.0024 or -0.22%. On Monday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $102.23, down $0.32 or -0.31%.

Federal Reserve Chair Jerome Powell on Monday delivered his most muscular message to date on his battle with too-high inflation, saying the central bank must move “expeditiously” to raise rates and possibly “more aggressively” to keep an upward price spiral from getting entrenched, Reuters reported.

Meanwhile, ECB President Christine Lagarde said on Monday the world’s two top central banks will move out of sync in the foreseeable future, as the war in Ukraine has vastly different effects on their economies.

The divergence in central bank policy favors the U.S. Dollar over the Euro. The U.S. Federal Reserve raised interest rates last week and signaled a string of future moves, just days after the ECB said it was in no hurry to raise its record-low deposit rate, even while it continues to unwind exceptional stimulus.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0901 will change the main trend to down. A move through 1.1137 will signal a resumption of the uptrend.

On the upside, resistance is a pair of 50% levels at 1.1098 and 1.1151. This zone stopped the rally at 1.1137 on March 17.

On the downside, the potential support is the zone formed by a pair of 50% levels at 1.1019 and 1.0972.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the EUR/USD on Tuesday is likely to be determined by trader reaction to 1.1019.

Bearish Scenario

A sustained move under 1.1019 will indicate the presence of sellers. The first downside target is 1.0972. This is a potential trigger point for an acceleration to the downside with 1.0901 the next target.

Taking out 1.0901 will change the main trend to down and could trigger an acceleration to the downside with 1.0806 the next major target.

Bullish Scenario

A sustained move over 1.1019 will signal the presence of buyers. If this creates enough upside momentum then look for a surge into the resistance cluster consisting of 1.1098, 1.1137 and 1.1151. The latter is a potential trigger point for an acceleration to the upside.