EUR/USD Weakens Under 1.1387, Strengthens Over 1.1407

The Euro is up against the U.S. Dollar at the mid-session on Wednesday as Euro Zone government bond yields rose as fears of a Russian invasion of Ukraine began to subside, boosting risk appetite and allowing investors to shift focus back to monetary policy tightening.

At 17:14 GMT, the EUR/USD is trading 1.1379, up 0.0020 or +0.18%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $105.60, up $0.11 or +0.10%.

U.S. Secretary of State Antony Blinken told Russian Foreign Minister Sergei Lavrov that the United States needs to see “verifiable, credible, meaningful de-escalation.” Russia’s defense ministry released footage that, it said, showed it was returning some troops to base after exercises.

“Assuming the recent flare-up (of geopolitical tensions over Ukraine) was the last such iteration, then yields will be free to resume their rise,” ING analysts said.

“Our base case remains that inflation pressure and central banks’ urgency in tightening policy will continue to push rates higher,” they added.

Two European Central Bank (ECB) officials made the case for ending the ECB’s bond-buying scheme, while positioning ahead of the next policy meeting on March 10.

Look for heightened volatility with the release of the Fed minutes at 19:00 GMT. The central bank is widely expected to be hawkish.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.1280 will signal a resumption of the downtrend. A move through 1.1495 will change the main trend to up.

The minor range is 1.1495 to 1.1280. The EUR/USD is currently trading on the weak side of its pivot at 1.1387 after an earlier test.

The main range is 1.1692 to 1.1122. Its retracement zone at 1.1407 to 1.1474 is resistance. This is followed by a longer-term retracement zone at 1.1516 to 1.1608.

The short-term range is 1.1122 to 1.1495. Its retracement zone at 1.1308 to 1.1265 is support. This zone stopped the selling at 1.1280 on Monday.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD into the close on Wednesday is likely to be determined by trader reaction to 1.1387 and 1.1407.

Bearish Scenario

A sustained move under 1.1387 will indicate the presence of sellers. If this move creates enough downside momentum then look for a break into the retracement zone at 1.1308 to 1.1265. The latter is a potential trigger point for an acceleration to the downside.

Bullish Scenario

A sustained move over 1.1407 will signal the presence of buyers. If this move is able to create enough upside momentum then look for a surge into 1.1474 to 1.1516. Inside this zone is the main bottom at 1.1495.